Data Center Spending Will Surge to $1.4 Trillion in 2027. Here’s 1 Stock to Buy With $500 to Capitalize on This Massive Opportunity
Applied Materials is a key cog in the AI data center ecosystem, and its shares can surge impressively as the semiconductor equipment market grows.
By 2027, spending on data center systems is projected to surge by 55%, reaching nearly $1.4 trillion. This growth is fueled by hyperscalers and AI companies expanding their data center infrastructure to accommodate artificial intelligence workloads. As a result, the semiconductor industry is expected to experience significant growth, as chips make up 95% of an AI data center server rack's value.
Applied Materials (AMAT), a leading manufacturer and seller of semiconductor manufacturing equipment, has capitalized on the healthy demand for chips this year. The company reported a 25% year-over-year revenue increase to $9.12 billion in its fiscal 2026 third-quarter results, with non-GAAP earnings per share jumping 41% to a record $3.50.
Looking ahead, Applied Materials anticipates its semiconductor revenue could grow from $1 trillion in 2025 to a range of $1.7 trillion to $3.2 trillion by 2030, driving demand for wafer and fabrication equipment (WFE) sales. The company's services segment is expected to generate over $12 billion in revenue by 2030, up from $6.4 billion in fiscal 2025.
With an attractive valuation at around $400 per share, trading at just 23 times forward earnings, and analysts projecting a nearly doubled EPS within two years, Applied Materials could potentially reach a premium valuation of $710 per share within two years.
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