We value AMAT at $170 using a 19x P/E multiple on 2026E EPS power. We view a 19x multiple, above AMAT's 3-year average multiple of 17x, as appropriate given secular tailwinds.

Downside risks to the achievement of our target price include the following: 1) As fab utilization and capital equipment orders are closely linked to the stock price, any material differences to our supply/demand model (e.g. demand drops suddenly, or supply increases more rapidly than we predict) may cause our valuation methodology to be inaccurate. 2) As the market share leader in multiple sub-segments of semiconductor equipment, AMAT is uniquely positioned to capitalize on inflections as well as face tough competition from large peers in industry cycles.