Key Moments
- Applied Materials Inc (NASDAQ:AMAT) rises 8% in premarket trading after Barclays upgrades the stock to Overweight from Underweight.
- Barclays says China-related risks are already priced in, while rising foundry and DRAM investment boosts AMAT’s relative appeal.
- The bank highlights Nvidia, Micron, KLA, MTSI, and Corning as preferred AI infrastructure plays, while taking a cautious stance on consumer and analog-focused chips.
Barclays Move Lifts Applied Materials
Applied Materials Inc (NASDAQ:AMAT) is trading sharply higher in premarket action. Shares are up 8% after Barclays raised its rating on the stock to Overweight from Underweight. This change comes amid a surge in artificial intelligence-related spending, which Barclays views as a durable multi-year driver for semiconductor earnings.
The bank noted that the pace and size of AI deployments remain uncertain. However, it believes the trend supports the sector overall and strengthens the case for companies positioned in core AI infrastructure.
AI Proximity and AMAT’s Relative Underperformance
Exposure to AI has been the main factor behind U.S. semiconductor performance. Companies closer to core AI infrastructure generally outperformed. In contrast, Applied Materials has lagged, gaining only 12% in 2025. Barclays attributed this underperformance to concerns over China competition and exposure, which weighed on investor sentiment.
China Risk Seen as Priced In
Barclays said the market has largely priced in worries about China-related competition. At the same time, rising spending on foundry and DRAM supports Applied Materials. In the bank’s view, AMAT looks attractive relative to peers due to its positioning in these areas.
Barclays Sector Preferences and Stock List
The bank outlined its preferred names across different segments of the AI and semiconductor ecosystem. Nvidia, Micron, KLA, MTSI, and Corning topped the list. Conversely, Barclays is cautious on Cirrus Logic, Qorvo, Skyworks Solutions, and Texas Instruments because of their exposure to consumer and analog markets.
| Segment | Preferred Stocks |
|---|---|
| Compute | Nvidia |
| Storage | Micron Technology |
| Interconnect | Credo Technology, MTSI |
| Semiconductor Capital Equipment | KLA Corporation (NASDAQ:KLAC) |
AI Infrastructure: Power Constraints and Nvidia Upside
Barclays expects compute-related AI deployments to reach roughly 20 gigawatts in 2027. It added that power availability is emerging as a key bottleneck. Consequently, Nvidia is positioned to absorb most of the demand. The bank estimates $45 billion upside for Nvidia’s 2026–2027 revenue forecasts.
Upcoming model launches in late Q1 or early Q2 will be pivotal for investor confidence in AI spending returns. Barclays stressed that these releases are a key inflection point for assessing potential gains.
Storage Dynamics: NAND Discipline and HBM Constraints
In storage, Barclays expects NAND supply discipline to continue through at least the first half of the year, which should support near-term trading. High-bandwidth memory also serves as a long-term structural driver.
However, limited capacity and elevated pricing for some memory products could pressure consumer devices. This may create headwinds for companies with significant consumer-focused exposure.
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