Goldman Sachs Raises Applied Materials Price Target to $645, Bullish on DRAM and HBM Growth
Alina Collins
Goldman Sachs raised its price target on Applied Materials from $520 to $645 while keeping a Buy rating, arguing that DRAM and HBM capacity buildouts will drive equipment demand for years — a bet not on one quarter's earnings, but on the industry's entire capital-spending cycle.
Why is Goldman raising the target now?
The new $645 target sits about 7% above the latest close, implying roughly 32× normalized EPS of about $20 per share.
This means → Goldman is valuing Applied Materials on long-run steady-state earnings, not near-term upside — 32× prices in what the company can earn in a "normal" year.
Goldman forecasts 2026 non-GAAP EPS of $14.15, roughly 6% above the Street consensus, and expects the company to outgrow peers.
Why does the thesis center on DRAM and HBM?
DRAM — dynamic random-access memory, the most common memory chip in servers — is Applied Materials' core revenue driver. HBM — high-bandwidth memory, a premium DRAM variant — is the must-have companion to AI accelerator chips.
In plain terms = Applied Materials sells the machines that *make* memory chips, not the chips themselves. Its earnings track how fast fabs expand, not how many individual chips ship.
This reflects a broader point: owning Applied Materials is essentially a bet on the industry-wide capex cycle — as long as fabs keep building and buying equipment, the company keeps benefiting.
What other growth drivers exist beyond memory?
Three parallel tracks: ① DRAM and HBM capacity buildouts, including new fabs; ② demand from sub-2 nm advanced logic nodes; ③ advanced packaging — bundling multiple chips into a single package.
Management expects the advanced-packaging segment to grow revenue by more than 50% in 2026, making it the fastest-growing business line.
Order visibility already extends to 2028. CEO Gary Dickerson said some customers have shared equipment-demand plans stretching to 2030.
How did the latest earnings look?
Fiscal Q2 revenue hit $7.91 billion, up 11% year-over-year — a record. EPS came in at $2.86, beating the Street estimate of $2.68.
The next report drops August 13; consensus expects EPS of $3.39 on revenue of $8.94 billion.
This means → August 13 is the key proof point — whether management's multi-year growth narrative is converting into actual orders will start showing up in this print.
The stock is up 135% this year — is there room left?
Year-to-date, the stock has surged 135%, versus roughly 11% for the S&P 500 — far outpacing the broader market.
Goldman is confident on fundamentals but cautious on timing, flagging two risks it considers not fully priced in.
The 29 covering analysts have a consensus target of $617.21, just above the latest close of roughly $602.50 — most see limited near-term upside.
What are those two risks?
Export-control risk: Applied Materials ships most of its equipment to mainland China, Taiwan, and South Korea. New restrictions on advanced-process equipment would hit revenue directly.
Competitive risk: Chinese semiconductor-equipment makers are steadily gaining market share, squeezing Applied Materials' addressable market.
In plain terms = the fundamental story is strong, but "who you're allowed to sell to" and "how fast rivals are catching up" remain open questions with no clear resolution yet.
Content is for reference only, not financial advice.