Investing.com -- Applied Materials Inc (NASDAQ:AMAT)shares are up 8% in premarket trading. Barclays upgraded stock to Overweight from Underweight.
Proximity to AI has been the main driver of U.S. semiconductor stock performance. Proposed AI spending points to a multi-year earnings tailwind, though the timing and scale of deployments remain debated.
Applied Material has underperformed due to valid concerns around China competition and exposure, with stock gaining just 12% in 2025.
But according to Barclays concerns around China exposure and competition are already reflected in the stock while rising foundry and DRAM spending makes Applied’s exposure to those areas attractive relative to peers.
Barclays said its preferred names are Nvidia in compute, Micron Technology in storage, Credo Technology and MTSI in interconnect, and KLA in semiconductor capital equipment.
Stock performance in 2026 is likely to favor companies tied directly to core parts of the AI buildout.
It flagged Corning, KLA Corporation (NASDAQ:KLAC), MTSI, Micron and Nvidia as its favored stocks, while taking a more cautious stance on Cirrus Logic, Qorvo, Skyworks Solutions and Texas Instruments due to consumer and analog exposure.
On AI infrastructure, compute announcements imply about 20 gigawatts of deployments in calendar 2027, with power availability emerging as the key constraint.
It said Nvidia is positioned to capture the bulk of that demand, estimating $45 billion of upside to both its 2026 and 2027 revenue forecasts. Barclays said upcoming model launches in late Q1 or early Q2 are a key inflection point for investor confidence in returns on AI spending.
In storage NAND supply discipline should hold through at least the first half of the year, supporting the trade for now, while high-bandwidth memory remains the longer-term structural driver. It said limited capacity and high prices could pressure consumer devices, weighing on companies with exposure to that segment.
