We recently published a list of the 12 Best Stocks to Buy in 2025 for Beginners. In this article, we are going to take a look at where Applied Materials, Inc. (NASDAQ:AMAT) stands against other best beginner stocks to buy in 2025.
Stock Market Outlook for 2025
On December 12, Tom Lee, Fundstrat Global Advisors managing partner and head of research, appeared on CNBC to talk about his 2025 playbook. After two years of significant market gains, Lee’s playbook painted an optimistic yet cautious outlook for the stock market in 2025. He anticipated that the S&P 500 would rise to approximately 7,000 by mid-2025 before retreating to around 6,600 by the end of the year. This highlights an overall expected increase of about 8% for the year, consistent with historical averages for stock market returns.
Furthermore, Lee estimated the Earnings Per Share (EPS) for the S&P 500 to be around $260 in 2025, going up to $300 in 2026. These numbers are slightly below the Wall Street consensus estimates, which show an average of around $268 for 2025. Talking about his investment thesis, Lee believed several themes could bring a positive trajectory in the market in 2025. In his own Dickensian version, he predicted a “tale of two halves,” where the first half of 2025 is expected to see strong market performance, with a potential pullback in the second half. The positive first-half performance is attributed to factors such as market-friendly initiatives under President Trump’s administration and Federal Reserve policies. The pullback in the second half of 2025 reflects historical trends after strong consecutive years.
READ ALSO: 12 Undervalued Defensive Stocks for 2025 and 10 Best Soaps and Cleaning Materials Stocks to Invest In.
Mega Cap Companies: Is There Potential?
Lee was of the opinion that the small-cap sector may have potential even though it has historically underperformed relative to large-cap stocks. He also talked about mega-cap companies and how they’re leading, mentioning that investors typically reach for these companies when there is even a possibility of risk in the market. In addition, mega-cap stocks are highly sensitive to falling interest rates. Since the tech market is bullish after the December rate cut is in effect, the investment case for megacaps is further strengthening.
However, despite an overall positive outlook, Lee acknowledged that several risks may impact market performance. For instance, he was of the view that the newly formed Department of Government Efficiency (DOGE) could potentially lead to reduced government spending and slower economic growth if it is too effective in cutting costs. Furthermore, the implementation of tariffs poses another concern, as tariffs can adversely affect corporate profits and financial conditions. Lee’s pointing out of historical patterns showed that after two years of considerable gains, markets are prone to decline in the latter half of the third year.
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of 40 blue chip companies with a 10-year revenue compound annual growth rate (CAGR) between 7%-15%. We then selected the top 12 stocks most popular among elite hedge funds. We sourced hedge fund data from Insider Monkey’s database. The stocks are sorted in ascending order of the number of hedge fund holders that have stakes in them, as of Q3 2024.
Why do we care about what hedge funds do? 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A technician in a clean room assembling a semiconductor chip using a microscope.
Applied Materials, Inc. (NASDAQ:AMAT)
10-year Revenue CAGR: 11.60%
Number of Hedge Fund Holders: 74
Applied Materials, Inc. (NASDAQ:AMAT) provides manufacturing equipment, software, and services to semiconductors and related industries. It operates through the Semiconductor Systems, Applied Global Services, and Display & Adjacent Markets segments. Applied Materials, Inc. (NASDAQ:AMAT) is the largest semiconductor equipment company in terms of revenue and is the most diversified in market reach. Its stock has grown over 600% in the past ten years, generating a total return of more than 700%. For reference, the S&P 500 generated a total return of 260% in the same time frame.
The company has experienced cyclical growth and is a significant force in the expanding semiconductor segment. Its revenue grew at a compound annual growth rate (CAGR) of 12% between fiscal 2014 and 2024, and its earnings per share (EPS) grew at a CAGR of 26%. While the company has experienced decelerating growth in the past few years due to a challenging macroenvironment and tightening performance in China due to export curbs, it expects to bounce back and accelerate in the coming few years. This optimism is linked to the market’s growing demand for more powerful AI, denser memory, and energy-efficiency chips.
Applied Materials, Inc. (NASDAQ:AMAT) also has plans to improve its ecosystem through its new integrated solutions that amalgamate steps like etching, material modification, and material deposition into a single, integrated system. It also expects to deal with the challenging environment in China by gradually reducing its exposure to that volatile market. Analysts expect Applied Materials, Inc.’s (NASDAQ:AMAT) revenue to increase by 9% in fiscal 2025, and another 8% in fiscal 2026.
Overall, AMAT ranks 11th on our list of the 12 best stocks to buy in 2025 for beginners. While we acknowledge the potential of AMAT, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an 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 Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
