AI in Focus: Applied Materials

The company recently unveiled plans to grow revenue, earnings, and free cash flow by allowing customers to boost improvements in chip power, performance, area, and cost/time to market (PPACt). Plans include generating 70 percent of future services and parts revenue through subscription-like long term agreements.

“The core strategy is to be the PPACt enablement company.” says President and CEO Gary Dickerson

The new strategy is aligned to meet the complex needs of customers. Applied is committed to sustainable growth of the semiconductor industry, Its ESG initiative is driven in collaboration with suppliers, customers, and the computing industry.

The digital transformation of the global economy and new Al workloads require new architectures based on new types of silicon. Moore’s Law 2D scaling is slowing, PPACt is required for chip and system level improvements. As a result, the business model has shifted to solutions delivered via subscription models.

The Applied Al(X) (Actionable Insight Accelerator) allows semiconductor engineers to harness the power of big data and AI to accelerate the development of new chip technologies.

As the silicon content per device is increasing. Applied is addressing growing demand through their CAPS group (loT, Communications, Automotive, Power and Sensors). This segment is now generating over $3 billion per year.

Conclusion

With adoption of Al, a revolution in chip making is underway. According to client Dr. Mark Liu, chairman of TSMC, “…We need to innovate in new transistor structures, in new materials, in new system architecture, and in new 3D integration. It is an exciting time. We look forward to working with Applied Materials to discover the future semiconductor innovations.”

The stability of a subscription like revenue stream should sit well with more value-oriented investors Applied is also committed to returning between 80 and 100 percent of free cash flows to shareholders.

Pete Weishaupt owns no shares of Applied Materials. Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. The AI Investor has a disclosure policy. Keep The Artificially Intelligent Investor free. Explore investing in farmland with AcreTrader. (Affiliate link.)

Originally published at https://theaiinvestor.substack.com.