Applied Materials Surges 98% YTD as AI Capex Debate Rattles Chip Gear Stocks

Applied Materials and its chip equipment peers entered 2026 as prime beneficiaries of the AI infrastructure buildout, with order visibility stretching further out than in prior cycles as hyperscalers, foundries, and memory makers rushed to expand capacity for AI accelerators. Equipment vendors responded by raising capacity plans for 2027 and beyond, and services businesses tied to installed tools accelerated alongside factory utilization, driving both earnings growth and multiple expansion across the group. The gains reflected genuine demand signals: Lam Research benefited from improved NAND spending and DRAM node transitions, KLA saw process control intensity rise with advanced packaging adoption, and ASML's lithography remained a bottleneck in advanced logic and DRAM ramps.

However, the rally has collided with mounting skepticism about whether the capex cycle's scale justifies current valuations. A Wall Street Journal analysis revealed that nine top tech companies carry roughly $3 trillion of off-balance-sheet AI commitments—growing faster than the roughly $600 billion of capital expenditures they reported over the past year. Meanwhile, disclosures from Anthropic (annualized revenue run rate of $65 billion at end of July) and OpenAI (run rate of $40 billion) landed below some investor expectations, feeding doubts about the pace of AI infrastructure spending. These reports, combined with elevated 30-year Treasury yields now topping 5.3%, created a sharp reversal: all major equipment names traded lower Tuesday despite their year-to-date strength.