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Editor's Note: Marc Chaikin made one of Wall Street's most popular indicators... found on every Bloomberg and Reuters terminal in the world. Now he's pounding the table on Silicon Valley's most popular startup, a breakthrough AI lab that recently surged 80X in a single quarter. Click here for the full details, or read below to learn more...
Dear Reader,
This AI lab planned for 10X growth in 2026.
Instead, its revenue soared 80-fold in one quarter.
In fact, it's on track to outsell OpenAI and SpaceX put together.
And – to top it all off – it's on the verge of achieving its first profitable quarter – a milestone it didn't expect to celebrate until 2028.
This company didn't exist a few years ago. Now it's the front-runner in the AI race.
I've been investing for 60 years, and I've never seen a growth story like this.
Last week, this red-hot startup finally filed to go public. It's expected to make its big debut this fall.
But on June 16, I believe it's going to make an announcement that could make its already enormous $965 billion valuation climb sharply higher.
Leaked source code refer to this plan as Project Tengu, and I expect it to spark a 42-fold investment boom – not to mention a $500 trillion wealth transfer.
Nvidia CEO Jensen Huang calls this technology "incredible."
And a senior Google engineer said it recreated a year's worth of work in one hour.
When I showed one of my colleagues a short, 30-second demonstration of Tengu, it left her stunned.
She said, "This makes ChatGPT look like a simple parlor trick."
I believe Tengu could turn this startup into the most valuable company in the world by the end of the decade.
Best part?
You don't have to wait until its IPO to get a piece of the action.
I've discovered a $40 "backdoor" into this company that anyone with an internet connection can take advantage of.
Click here for the full details (must read before June 16).
Regards,
Marc Chaikin
Founder, Chaikin Analytics
P.S. U.S. businesses are now adopting this firm's software at a faster rate than OpenAI. In fact, it's become a trusted AI powerhouse for over 300,000 companies worldwide. But this is just the beginning. Click here to find out what I anticipate for June 16.
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The Toll Road Nobody Talks About
Everyone is watching the chips. The AI accelerators, the memory ramps, the foundry wars. But there is a layer below all of that where the real structural advantage lives – and it barely gets a mention in the weekly stock rotation chatter.
You cannot build a chip without first building the equipment that builds the chip. That equipment requires deposition systems, etch tools, thermal processing gear, and materials engineering at atomic scale. One company controls more of that surface area than anyone else on earth.
That company is Applied Materials. Ticker: AMAT.
What the Numbers Actually Say
Fiscal year 2025 closed with record annual revenue of $28.37 billion, up 4% year over year. That marked AMAT's sixth consecutive year of revenue growth. Non-GAAP EPS for the full year came in at $9.42, up 9% year over year. Gross margins have been running near 49% for most of the year – that is not a commodity margin profile. That is a pricing power margin profile.
Zoom into Q3 fiscal 2025 specifically and the picture gets sharper. Record quarterly revenue of $7.3 billion, up 8% year over year. Non-GAAP EPS of $2.48, up 17%. Cash from operations came in at roughly $2.6 billion for the quarter – about 36% of revenue converting directly to cash. That is a business that prints its own funding for future R&D cycles.
Wafer fab equipment spending grew 19% year over year in Q1 2025 alone, with another 12% increase expected in Q2 according to SEMI data. AMAT holds approximately 20% of the total WFE market. With the industry's deposition segment being its core strength, the company's tools are embedded in virtually every leading-edge logic, DRAM, and NAND production line operating today.
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Missed Tesla? PayPal? SpaceX? You Might Regret Missing This One Too...
Many are calling him The Next Elon Musk...
His first company made investors 6,566% before the age of 25...
Now, he's building one of the most-anticipated companies in the world... with $26 billion in government contracts already in place.
And one rare 4-letter ticker gives you early access - before the IPO.
Click here now to watch the briefing. |
Why the Moat Is Structural, Not Cyclical
Here is the part people skip. AMAT does not compete with Nvidia or TSMC or AMD. It supplies the foundries that supply everyone else. TSMC, Samsung, Intel – they all need Applied's deposition and materials engineering systems to process the wafers that eventually become the chips the world argues over. Switching costs at the tool level are enormous. Process recipes are tuned over years around specific equipment. A foundry does not swap out its deposition stack the way a CFO swaps out a software vendor.
Slight tangent, but it matters: the global fab expansion happening right now is multi-polar in a way it has never been before. TSMC alone is targeting $52 to $56 billion in capital expenditure for 2026, up from roughly $40.9 billion spent in 2025. Global semiconductor capex is projected to reach $200 billion in 2026 – a 20% increase over 2025 levels. The EU, Japan, India, South Korea, and the U.S. are all subsidizing domestic fab construction simultaneously. Every single one of those fabs needs materials engineering equipment. There is no version of advanced chip production that routes around Applied Materials.
Management has already flagged it: they are preparing operations to support higher demand beginning in the second half of calendar 2026. That is not vague optimism. That is supply chain pre-positioning based on confirmed customer conversations.
Where the Risk Actually Lives
China is the number to watch. The region accounted for 37% of AMAT's revenue as recently as 2024, and expanding U.S. export controls have actively constrained what equipment the company can ship there. Management guided for reduced China demand going into Q4 fiscal 2025 – that was a real drag on the quarter. The export control environment is not improving, and any escalation tightens the revenue ceiling from that geography further.
On valuation – be honest with yourself here. The trailing P/E is sitting above 45x at current prices. The forward P/E is around 35x to 36x. That is meaningfully above AMAT's five-year average of roughly 21x. The stock is pricing in a durable upcycle, not a one-quarter beat. If leading-edge customers turn non-linear with orders – which management already noted happening in Q4 – or if TSMC pulls back on any portion of its capex roadmap, the multiple compresses fast.
The CHIPS Act angle is also more nuanced than the bull case suggests. AMAT was denied direct CHIPS Act funding for its planned $4 billion EPIC research center in Sunnyvale. The Commerce Department concluded the project did not meet criteria designed for large-scale manufacturing sites. The company did receive up to $100 million for advanced semiconductor packaging R&D under a separate CHIPS funding tranche – but direct federal subsidy is not a reliable lever here. The real government tailwind is indirect: every CHIPS-funded fab that gets built needs AMAT equipment inside it.
Quick Scorecard
- FY2025 revenue: $28.37B – record, sixth consecutive year of growth
- Non-GAAP gross margin: ~49% – pricing power intact
- Q3 FY2025 cash from operations: ~$2.6B, or 36% of revenue
- WFE market share: ~20% – dominant in deposition
- Global semicon capex 2026 projection: ~$200B – up 20% from 2025
- TSMC 2026 capex target: $52B to $56B – AMAT's largest customer category accelerating
- China revenue risk: ~37% of revenue in 2024, actively declining under export controls
- Trailing P/E: ~45x – elevated vs. five-year average of ~21x
- Forward P/E: ~35x to 36x – requires continued strong execution
- H2 2026 demand ramp: management explicitly flagging preparation for higher order volumes
The bottom line is straightforward, if uncomfortable for value hunters. AMAT is not cheap on any trailing metric right now. What it is, is structurally irreplaceable. If global fab construction continues accelerating through 2026 and 2027 – and the current capex commitments from TSMC, Samsung, and government-backed programs across four continents suggest it will – then the forward earnings estimates may be too conservative. The question is not whether Applied Materials matters. It clearly does. The question is whether the market has already priced in everything that could go right, and left you holding the bag for anything that does not.
Worth watching closely into the second half of 2026.
– The Cheap Investor
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