We recently compiled a list of the 11 Oversold Blue Chip Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Applied Materials, Inc. (NASDAQ:AMAT) stands against the other oversold blue chip stocks.

The uncertainty related to the tariff announcements continues to influence Wall Street. Reuters reported that the S&P 500 is down 4.3% since Trump took office on January 20, and tariffs are the main concern for investors as they believe that can adversely impact the economic growth and be inflationary. While Trump believes that tariffs can increase the country's revenue, fuel broad-based growth, and can be used as a negotiating tool with other countries, the investors believe that trade policies can weaken consumer confidence and limit the capital spending from companies.

Long Term Outlook Remains Intact

As per Franklin Templeton, the US equities have managed to provide strong gains over the past few years, with the S&P 500 repeatedly touching record highs, thanks to the Magnificent Seven’s dominance in AI. Despite elevated valuations, the broader market outlook is positive. Innovation and investment continue at a pace, sales growth has been accelerating, and earnings are expected to see a double-digit rise this year. Also, the US economy has a more business-friendly administration. That being said, there are risks, mainly related to the US trade policy and the expected impact of tariffs on critical sectors, including technology.

Amidst such uncertainties, Franklin Templeton believes that investor confidence in the US equities is expected to remain strong. While the risks might be elevated, the new administration’s policy changes are expected to finally result in long-term positives for the broader US economy.

READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.

Blue Chips to Provide Shelter

While the Mag 7 stocks are well-placed for the long-term growth, the market leadership is expected to broaden as and when acceleration in innovation occurs, says Franklin Templeton. The investment firm believes that active management is of utmost importance. The pivot from AI infrastructure to platforms remains well underway. Therefore, identifying the right companies at the right time—ones possessing the technology, strategy, and adaptability to maintain and sustain long-term growth—are expected to be critical to investment success.

The US equities, mainly large caps, have been performing strongly, courtesy of the innovation and investment. Notably, over the past 6 months, the Dow Jones Industrial Average has seen an increase of over ~4.5%. Even though the Mag 7 stocks continue to support the market momentum, the investment firm sees growing opportunities beyond such market leaders. With the continuation of AI-driven cycle, the competitive landscape remains dynamic and has been creating new growth areas.

Our Methodology

To list the 11 Oversold Blue Chip Stocks to Buy According to Hedge Funds, we used a screener and the SPDR S&P 500 ETF to shortlist the companies that have declined over the past year. Next, we chose the stocks that are popular among hedge funds, as of Q4 2024. Finally, the stocks were arranged in ascending order of their hedge fund sentiments.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

A technician in a clean room assembling a semiconductor chip using a microscope.

Applied Materials, Inc. (NASDAQ:AMAT)

% Decline Over Past 1 Year: ~22%

Number of Hedge Fund Holders: 80

Market Cap as on March 7: $126.4 billion

Applied Materials, Inc. (NASDAQ:AMAT) is engaged in the provision of manufacturing equipment, services, and software to the semiconductor, display, and related industries. Stifel analysts reiterated the “Buy” rating on the company’s stock, maintaining a price target of $235.00. There are expectations of stability in advanced foundry and logic segments. Brian Chin, an analyst of Stifel, remains optimistic about Applied Materials, Inc. (NASDAQ:AMAT)’s outlook, lauding the potential to sustain growth amidst the current challenges.

For Q2 2025, the company is encouraged by the trends aiding continuing customer investments to enable leading-edge technology inflections, while taking into consideration export control related headwinds. For Q2 2025, Applied Materials, Inc. (NASDAQ:AMAT) expects total net revenue of $7,100 million (+/- $400 million), and a non-GAAP gross margin of ~48.4%. Overall, the semiconductor equipment industry continues to experience a period of transformation fueled by the higher demand for advanced chips throughout various sectors. Applied Materials, Inc. (NASDAQ:AMAT)’s competitive advantage revolves around its broad portfolio of technologies enhancing chip efficiency and enabling advanced packaging solutions.

Vltava Fund, an investment management company, published its Q4 2024 investor letter. Here is what the fund said:

“In the quarter just ended, we added to the portfolio two new companies from the technology sector: Applied Materials, Inc. (NASDAQ:AMAT) and Lam Research. Both are in the same industry as is another of our investments that we have held for some time, KLA Corporation. This industry is termed semiconductor devices and materials. One chapter in Hidden Investment Treasures is devoted to investing in technology companies and, among other things, the controversy over what really constitutes a technology company. As investors, we try to view technology companies not according to the industry into which they are formally classified but by whether the technologies and technological processes used in the production of their products and services are an essential element in value creation or if they are a source of long-term, sustainable competitive advantage. Among the companies that are formally categorized as technology-based and fall into either the Information Technology or the Communications Services sector, we find some that can be said to be just that but also others for which this classification is at least debatable. Similarly, among companies that do not formally belong to these two sectors, we find many that clearly are built to a large extent on technology and base their market positions and competitiveness on it. In the cases of Applied Materials and Lam Research, there can be no doubt that these are technology companies not only as a formality but also in fact.

Applied Materials provides manufacturing equipment, services, and software for the semiconductor, display, and related industries. Its principal business activities are semiconductor systems and Applied Global Services. Its largest customers are Samsung and Taiwan Semiconductors, but its overall clientele is more diversified than is that of Lam Research. At first glance, it would appear that Applied Materials has a somewhat less tangible and definable competitive advantage compared to KLA Corporation and Lam Research, but the numbers do not support such a view. Net margins likewise in the neighborhood of 27% and ROCE around 30% are outstanding. Basically, it can be said that all three companies we own have very similar underlying profitability metrics. Even their valuations, growth, and potential are similar. All have strong free cash flow and strong balance sheets, and they are regularly buying back their own shares over the long term and in large volumes…” (Click here to read the full text)

Overall AMAT ranks 4th on our list of the oversold blue chip stocks to buy according to hedge funds. While we acknowledge the potential of AMAT as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than AMAT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

 

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

 

Disclosure: None. This article is originally published at Insider Monkey.