Shares of semiconductor equipment leader Applied Materials surged 8.1% to close at $354.91 on Friday, propelled by a robust business outlook that highlighted accelerating investments in artificial intelligence computing. The rally occurred despite the company reporting a slight year-over-year revenue decline for its fiscal first quarter.
For the quarter ended recently, Applied Materials posted revenue of $7.01 billion, a 2% decrease compared to the same period last year. The company reported non-GAAP earnings per share of $2.38. However, management provided strong guidance for the current quarter, projecting revenue of approximately $7.65 billion, plus or minus $500 million, and non-GAAP EPS of $2.64, give or take 20 cents.
Chief Executive Officer Gary Dickerson directly attributed the positive forecast to "the acceleration of industry investments in AI computing." This sentiment was echoed by analysts, with Morningstar senior equity analyst William Kerwin noting, "Artificial intelligence infrastructure demand is immense, and supply is scarce." The company's outlook suggests that swelling budgets for AI infrastructure and a tightening memory market are creating significant tailwinds for chip equipment manufacturers.
The optimism spilled over to other sector players. Shares of Lam Research and KLA also moved higher on Friday, indicating broad-based confidence in the wafer fabrication equipment (WFE) market. These companies provide the essential tools needed to process silicon wafers into finished semiconductors. The industry cycle is also seeing strength in adjacent areas like advanced packaging—which connects chips for enhanced performance—and high-bandwidth memory (HBM), a fast memory stack designed to meet the data demands of AI processors.
Despite the standout performance in chip equipment, the broader technology landscape faced headwinds. The Nasdaq Composite closed lower on Friday, and the tech sector recorded losses for the week. This divergence underscores investor nervousness about how rapidly AI advancements might disrupt existing profit streams and the capital required to stay competitive. "Large cap tech stocks continue to be an anchor on the market," observed Michael James, managing director at Rosenblatt Securities.
Market sentiment appears fragile, with volatility creeping in even after the release of softer inflation data. Barclays equity strategist Emmanuel Cau described the environment as one where "fear driving market sentiment" has put investors in "'sell first think later' mode," noting the speed at which AI-related headlines are reshaping the leaderboard of market winners and losers.
Investors now face a truncated but event-packed trading week following the Presidents Day holiday on Monday. U.S. equity markets will reopen on Tuesday. The immediate focus will shift to a packed economic calendar, including the second estimate of U.S. GDP, fresh housing data, and earnings reports from companies like Palo Alto Networks and Analog Devices.
The most anticipated event for tech traders, however, will likely be the release of the Federal Reserve's minutes from its January 27-28 meeting on Wednesday, February 18, at 2:00 p.m. ET. Any subtle changes in the policymakers' discussion regarding inflation or economic growth could significantly alter expectations for future interest rate cuts, which typically have an immediate ripple effect on technology stock valuations.
Later in the week, the market will also digest the Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index. Against this backdrop of macroeconomic uncertainty, the chip equipment sector's bullish narrative remains tempered by cyclical risks. Industry demand can be volatile; if major clients such as data center operators pause construction or decide they have sufficient capacity, orders for manufacturing tools could decline rapidly, potentially undermining current optimistic forecasts.
