Applied Materials Bets AI Boom Will Drive Logic, DRAM and Packaging Growth

Key Points

• Applied Materials says the AI boom is fueling multi-year demand growth in semiconductor equipment, with leading-edge foundry logic, DRAM and advanced packaging driving most incremental wafer fab spending in 2026.
• The company’s advanced packaging business is growing more than 50% this year to multiple billions of dollars, and Applied says it is the largest vendor in that category as AI server architectures evolve.
• CEO Gary Dickerson said Applied has strong visibility into customer roadmaps, is expanding capacity, and expects continued margin improvement, though China restrictions are now affecting about 10% of the business.

Applied Materials NASDAQ: AMAT Chief Executive Officer Gary Dickerson said artificial intelligence is driving a multi-year expansion in semiconductor manufacturing demand, with the company positioned around the areas he described as the fastest-growing parts of wafer fab equipment spending.

Speaking at a Bernstein conference with Senior Analyst Stacy Rasgon, Dickerson called AI “the biggest technology inflection of our lifetimes” and said demand is centered on leading-edge foundry logic, DRAM and advanced packaging. He said those three categories represent “way more than 80%” of incremental wafer fab equipment spending in 2026 and are expected to remain central to growth.

Dickerson said Applied is also using AI internally across innovation, product development, operations, supply chain, service engineering and process engineering. He said the technology is expected to help the company bring “multi-billion dollar products to market faster,” including some later this year, and make service engineers more productive.

AI Demand Drives Logic, DRAM and Packaging

In leading-edge foundry logic, Dickerson highlighted gate-all-around transistors, backside power delivery and wiring innovations as important drivers of Applied’s business. He said the adoption of gate-all-around and backside power increases Applied’s revenue per wafer start by about 30% and that the combination of transistor and wiring opportunities can move from $12 billion to $14 billion for 100,000 wafer starts.

Dickerson said Applied has built “integration innovators” over the past seven to eight years and that about 30% of the company’s revenue now comes from integrated systems, where multiple technologies are combined under vacuum. He said that capability is important because some films are only one or two atoms thick and can be damaged if exposed to air.

In DRAM, Dickerson said Applied has gained about 10 points of share in overall DRAM spending over a little more than a decade and is “by far the leader” in wafer fab equipment process tools for DRAM. He said high-bandwidth memory requires roughly three to nearly four times the number of wafer starts compared with standard DRAM for an equivalent number of bits, due to stacking and yield loss.

Dickerson said Applied is engaged with customers on CMOS logic improvements for higher-speed memory, as well as longer-term technologies such as 4F² and 3D DRAM. He declined to give customer timelines but said CMOS logic is the most near-term opportunity and that 4F² and 3D DRAM are expected to develop “over the next number of years.”

Advanced Packaging Business Growing More Than 50%

Dickerson described advanced packaging as “one of the most exciting inflections in the entire industry,” saying it is critical to connecting computing components at high density and improving “tokens per second per watt,” a metric he repeatedly cited as central to AI computing performance and efficiency.

He said Applied is the largest advanced packaging equipment vendor and that its packaging business is growing more than 50% this year to multiple billions of dollars. He pointed to larger package body sizes, higher I/O density, panel-level packaging, glass substrates and warpage control as areas of customer focus.

“If you look at an AI server today, in three or four years, the way you connect those computing components are going to be very different than what you see today,” Dickerson said.

Visibility, Capacity and EPIC Center

Dickerson said Applied has better visibility than ever into both customer technology roadmaps and demand. He said the company receives eight-quarter forecasts from every customer, along with longer commitments, and that Applied has invested to nearly double its operations capacity.

Applied is also using its EPIC Center to deepen customer collaboration. Dickerson said the company has announced 10 partners for EPIC, including TSMC, Samsung, Micron, SK Hynix, Broadcom, Advantest, Screen and universities, with more announcements expected.

He said the center is designed for “high velocity co-innovation” with customers, including work on future technology nodes extending as far as 10 years out. Dickerson said Applied is working on technologies beyond current N2 ramps, including A14, A10, A7 and A5, as well as future DRAM roadmaps.

Services, China and Margins

Dickerson said Applied’s services business is growing at a high-teens compound annual growth rate and represents a little over 20% of company revenue. He said more than two-thirds of the services business comes from service agreements and prescription or subscription revenue, which has been growing faster than the overall services business.

The company has more than 35,000 chambers connected to AI servers in customer fabs, with the majority remotely connected, Dickerson said. He said Applied is using AI for areas such as chamber matching, predictive maintenance and improving fab output per square meter.

On China, Dickerson said restrictions increased substantially in 2025 and affected about 10% of Applied’s business, more than double the prior level. He said China currently represents the mid-20% range of Applied’s semiconductor equipment and services business and is primarily an ICAPS market, covering IoT, communications, automotive, power and sensors. He said Applied expects ICAPS globally and in China to be flat to slightly up this year.

Dickerson said Applied is introducing new products for ICAPS customers, but noted that leading-edge demand tied to AI is growing faster. On local Chinese competition, he said Applied has performed well where it is able to compete, excluding restricted areas.

Discussing margins, Dickerson said Applied has been increasing prices on both existing and new products, with customer conversations now focused more on delivery times and access to technology innovations. He said he expects the company to continue improving both gross margin and operating margin.

At the close of the session, Dickerson said Applied is positioned in the fastest-growing parts of the industry and has deeper customer relationships than ever. “I have high confidence the growth rate for Applied is going to be very strong, both top line and bottom line going forward,” he said.

About Applied Materials NASDAQ: AMAT

Applied Materials, Inc is a U.S.-based supplier of equipment, services and software used to manufacture semiconductor chips, flat panel displays and other advanced materials. Headquartered in Santa Clara, California, the company designs and sells capital equipment and related technologies that enable production of integrated circuits, display panels and materials used across the electronics supply chain.

Applied Materials' offerings include process equipment and factory software that support critical steps in device fabrication, such as deposition, etch, implantation, inspection and metrology, as well as systems for packaging and advanced heterogeneous integration.

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