Applied Materials Caught in Korean Selloff, But $225 Billion Fab Equipment Boom and 40-Month Supercycle Offer Support

A sharp selloff in Seoul sent shockwaves through semiconductor supply chain stocks on Monday, with Applied Materials shedding 3.38 percent to close at €508.80. The drop followed a more than 5 percent collapse in South Korea’s KOSPI index on July 13, triggered by a brutal retreat in memory giant SK Hynix, which lost over 10 percent shortly after its Nasdaq debut. The rout rippled across global chip-equipment makers, dragging Applied Materials to a level 21.46 percent below its 52-week high of €647.80, reached just two weeks earlier on June 30.

Yet the price action stands in stark contrast to the underlying demand picture. The Bank of Korea released a report on the same day that pushed back against fears of a cyclical peak, projecting that the artificial-intelligence-driven semiconductor supercycle would persist at least through the first half of 2027. The central bank sees the expansion lasting 40 months — well above the historical average of 29 months — as supply of advanced chips continues to lag behind insatiable AI demand. South Korea’s monthly chip exports backed that view, hitting a record $44.82 billion in June, a near-200 percent jump year-over-year.

Investors in Applied Materials are betting that the equipment spending spree by chipmakers will follow a similar trajectory. Stifel estimates global wafer-fab equipment outlays will reach $145 billion to $150 billion in 2026 and climb to $225 billion by 2028. Hyperscale cloud providers plan to funnel roughly $1.8 trillion into AI infrastructure between 2026 and 2027. SK Hynix alone has committed over $64 billion to expand capacity for high-bandwidth memory, a product that remains a bottleneck through at least next year. For Applied Materials, which supplies the tools that fabricate these chips, the pipeline appears robust.

The company’s own numbers reinforce the story. Fiscal-second-quarter revenue rose 11.41 percent year-over-year to $7.91 billion, while earnings per share of $2.86 beat the consensus estimate of $2.68. The operating margin has hovered between 20 and 29 percent. Analysts at Susquehanna and Cantor Fitzgerald have lifted their price targets to $850 and $900, respectively, in recent weeks. Yet the market is currently trading Applied Materials below the average analyst target of €513.77 — by about 2.4 percent as of the most recent consolidative level of €526.60, which represented a gain of 129.56 percent year-to-date and 211.75 percent over the trailing twelve months. At Monday’s lower close, the year-to-date advance was 121.80 percent.

Should investors sell immediately? Or is it worth buying Applied Materials?

That disparity underscores a pause that many see as overdue after a stellar run. The stock remains 65.62 percent above its 200-day moving average of €307.21, and 17.11 percent above its 50-day average of €449.64 at the higher water mark. The 14-day relative strength index sits at a neutral 53, suggesting neither overbought nor oversold conditions. Still, the annualized volatility of 97.64 percent means the path forward could be choppy.

Two significant risks are giving investors pause. First, insider selling has accelerated. Chief executive Gary Dickerson offloaded 161,321 shares worth roughly $104.8 million in recent months, with additional sales in late June at elevated prices. In total, insiders sold about 278,088 shares during the latest quarter. While such moves are not necessarily a bearish signal, they raise questions about conviction at current valuations. Second, the financial health of key customers is a growing concern. Hyperscalers have collectively raised around $350 billion in debt over the past five years to fund their AI buildouts. Amazon alone is estimated to pay $1.31 billion in annual interest. If debt-service costs outpace free cash flow, capital budgets for new fabrication plants could be among the first to face cuts. Reports of delays at advanced nodes like 18A and capacity shifts at large foundries add to the uncertainty.

For Applied Materials, the next major catalyst is its own fiscal third-quarter earnings report in August. Management has guided for earnings per share of $3.16 to $3.56. If the quarterly numbers from major customers over the coming weeks confirm sustained investment in AI hardware, the stock could find support above its 50-day moving average and eventually challenge the consensus target. Should margins show compression similar to what some Korean materials suppliers have recently experienced, a correction toward the 100-day moving average of €383.32 cannot be ruled out. Either way, the tension between a historic equipment spending cycle and near-term technical and sentiment headwinds is likely to define Applied Materials’ trajectory through the third quarter.