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Applied Materials builds the giant machines and systems that computer chip factories use to make chips.
Applied Materials is the world's biggest maker of the machines that build computer chips. It does not design chips and it does not sell chips. Instead it sells the equipment and the know-how that chip factories need to turn a plain silicon wafer into a working processor or memory chip.
Making a chip is like building a skyscraper on a fingernail. Chips are made layer by layer, and Applied Materials sells tools for several of the hardest steps: depositing impossibly thin films of material onto the wafer, carving patterns into it, and polishing it flat between layers. Its customers are the big chipmakers, like TSMC, Intel, Samsung, and Micron. They buy from Applied Materials because the machines are brutally hard to build, and because the company has spent decades tuning them. The business is cyclical in a dramatic way. When chip demand booms, factories order machines and Applied Materials' sales surge; when demand cools, the orders dry up fast. That is why the company's results swing so much from year to year. It also faces serious competition: ASML dominates the most advanced lithography machines, and Lam Research and KLA fight it in other parts of the tool market. Applied Materials' edge is breadth — it sells more different chipmaking steps than almost anyone else. Lately the company has leaned hard into one big shift. The AI boom has made the most advanced chips hugely valuable, and building them requires more and more of the precise, expensive tools Applied Materials makes. That has helped push revenue to record levels, including a strong run through its latest fiscal year. It also spends heavily on research to stay ahead, and it returns a lot of cash to shareholders through dividends and buybacks. One example: the company bought back a large chunk of its own shares over the past decade, shrinking the share count meaningfully and making each remaining share worth more of the profits.
The honest risk is that this is a business tied to the spending plans of a handful of giant chipmakers. If they pause, Applied Materials feels it immediately. But every new generation of chips seems to need more layers, more precision, and more of its machines — which is why the company has stayed near the center of the industry for decades.
Saved answer · last researched 23 Oct 2026