To The Moon

$Applied Materials(AMAT)$ is the worid's largest manufacturer of semiconductor fabrication equipment. AMAT generates revenue through equipment sales (majority) and service contracts(~25% of revenue).

While once dominated by conglomerates like $IBM(IBM)$ and $Intel(INTC)$ , the semiconductor industry now has distinct players in chip design, fabrication and equipment manufacturing. AMAT is crucial in semiconductor manufacturing, providing essential tools and services to industry leaders such as $Taiwan Semiconductor Manufacturing(TSM)$ , $Samsung Electronics Co., Ltd.(SSNGY)$ and intel.

Competitive Advantages:

Unlike ASML, which dominates lithography, AMAT has a broad portfolio spanning multiple fabrication processes,incuding chemical mechanical planarization (CMP).etching, deposition and pattern engineering.

AMAT enjoys near-monopolies in key segments such as CMP and ion implantation making it difficult for customers to switch to alternative suppliers.

Growth:

1.Innovation: As each semiconductor node shrinks (e.g., 5nm to 3nm), AMAT benefitsfrom the increased equipment complexity and higher process step counts.

2.Geopolitics: The US,Europe and China are investing billions in semiconductormanufacturing to reduce supply chain risks, benefiting equipment providers like AMAT.

3.High-performance computing:Demand for advanced semiconductors is fuelingspending on cutting-edge fabrication technologies.

4.Recurring revenue: As fabs optimise their yields and look to extend the lifespan of theirequipment, AMAT's service contracts provide a stable revenue stream.

Risks:

1.Cyclicality: AMAT is exposed to semiconductor cyclicality, although service contractsand buybacks have helped mitigate some of this volatility.

2.China: Chinese firms are aggressively developing semiconductor equipment.

3.Customer concentration: AMAT generates significant revenue from just a handful ofcustomers (i.e.TSMC, Samsung, and Intel).