Why Applied Materials (AMAT) Stock Is Rising

Applied Materials, Inc. (AMAT) shares are trading higher by 4.63% to $194.75 during Thursday’s session. Shares of semiconductor and chip stocks are trading higher following Wednesday’s rate cut, which has lifted growth stocks and rate-sensitive sectors such as tech.

Wall Street analysts also raised expectations for more rate cuts after the Federal Open Market Committee slashed rates by 50 basis points.

Why This Matters: Applied Materials (AMAT) is a key supplier of semiconductor manufacturing equipment, which makes it highly sensitive to changes in capital spending by chipmakers. Interest rate cuts directly impact the cost of borrowing for these manufacturers, making it cheaper to finance large projects like building new semiconductor fabs or upgrading existing facilities.

This is significant because Applied Materials’ revenue relies on selling expensive and specialized equipment for these facilities. When rates fall, companies like Intel, TSMC and Samsung are more likely to increase their capital expenditures on such projects, which directly boosts Applied Materials' (AMAT) sales.

The semiconductor industry also operates on rapid innovation cycles, driven by the need to create smaller, faster, and more efficient chips. Lower interest rates reduce the cost of financing research and development in both Applied Materials’ customers and the company itself.

This makes it easier for semiconductor companies to fund investments in advanced equipment necessary to produce cutting-edge technologies, which further drives demand for Applied's tools.

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What Else: Growth companies, particularly those tied to long-term innovation like Applied Materials (AMAT), tend to see their stock prices rise when interest rates fall. This is because lower rates increase the present value of their future earnings, making them more attractive to investors.

With the cost of borrowing lower, both tech companies and their customers are more likely to invest in future growth, benefiting suppliers like Applied Materials (AMAT).

Lower rates also stimulate broader economic activity by encouraging consumers and businesses to spend more. As consumer demand for electronics, smartphones, and computers rises, the semiconductor industry must ramp up production to meet that demand.

This, in turn, could lead to greater demand for semiconductor manufacturing equipment, giving Applied Materials (AMAT) a potential revenue boost.

Traders and investors can gain exposure to through the SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust, Series 1 (QQQ) .

Read Also: Apple Revenue Growth ‘Just Too Slow For Investors To Get Excited About’: Analyst Highlights Advertising As Future Catalyst

How To Buy AMAT Stock

By now you're likely curious about how to participate in the market for Applied Materials (AMAT) – be it to purchase shares, or even attempt to bet against the company.

Buying shares is typically done through a brokerage account. You can find a list of possible trading platforms here. Many will allow you to buy ?fractional shares,' which allows you to own portions of stock without buying an entire share. For example, some stock, like Berkshire Hathaway, or Amazon.com, can cost thousands of dollars to own just one share. However, if you only want to invest a fraction of that, brokerages will allow you to do so.

In the the case of Applied Materials (AMAT), which is trading at $194.43 as of publishing time, $100 would buy you 0.51 shares of stock.

If you're looking to bet against a company, the process is more complex. You'll need access to an options trading platform, or a broker who will allow you to ?go short' a share of stock by lending you the shares to sell. The process of shorting a stock can be found at this resource. Otherwise, if your broker allows you to trade options, you can either buy a put option, or sell a call option at a strike price above where shares are currently trading – either way it allows you to profit off of the share price decline.

According to data from Benzinga Pro, AMAT has a 52-week high of $255.89 and a 52-week low of $129.21.