Sales of semiconductor manufacturing equipment will grow 23% in 2026 to $166 billion, according to industry association SEMI — and both Applied Materials and Lam Research are pulling back from 52-week highs even as their revenue accelerates past 25%.

Lam Research shares have retreated 27% since peaking on June 30, while Applied Materials has lost nearly a third of its value from its own 52-week high set the same day. Before that slide, Lam was up 84% in 2026 and Applied Materials up 89%.

SEMI's roadmap points higher still: equipment spending is expected to reach $201 billion in 2027 and $229.5 billion in 2028. Those forecasts frame the central question for investors — whether the recent pullback in both wafer fabrication equipment (WFE) suppliers is a buying opportunity, and which name offers the better entry.

How fast are the two companies actually growing?

Both companies reported sharp acceleration in their most recent quarters.

• Applied Materials: revenue rose 25% year over year in fiscal Q3 2026 (ended July 26) to $9.12 billion; non-GAAP EPS climbed 41% to a record $3.50. A year earlier, revenue grew just 8% and non-GAAP EPS 17%.
• Lam Research: revenue in fiscal Q4 2026 (ended June 28) increased 30% year over year to $6.72 billion; EPS rose 37% to $1.82.

AI chip demand sits behind both prints. Applied Materials' revenue from DRAM manufacturing equipment jumped 52% year over year, and the company expects advanced packaging equipment revenue to grow 70% in 2026 as chipmakers integrate specialized chiplets with memory onto single platforms for AI workloads.

What did management say about capacity?

On the August earnings call, Applied Materials management said "most leading edge logic and DRAM fabs are running at full capacity" at its direct customers. The company's customers have announced plans to develop over 10 new fabrication plants, and Applied Materials has started negotiating customer contracts for 2030 — a signal that management sees sustained demand well beyond the current cycle.

Lam's outlook tracks the same trend. The company now expects 2026 WFE spending in the low $150 billion range, up from its prior estimate of $140 billion, and anticipates strong spending to continue into 2027.

What do the current-quarter guides show?

Both companies guided to dramatic acceleration for the September quarter.

• Applied Materials expects fiscal Q4 revenue of $10.25 billion, up 51% year over year, with non-GAAP EPS of $4.02, up 85%.
• Lam Research expects revenue of $8.1 billion, up 52% year over year, with non-GAAP EPS of $2.15, up 71%.

The numbers are close enough that neither company clearly outruns the other on financial performance or outlook. Analyst estimates show no major difference in the long-term annual EPS growth the two are expected to deliver.

Can valuation break the tie?

Not by much. The two stocks carry identical forward sales multiples. Lam trades slightly cheaper on forward earnings, though the gap is narrow, and Applied Materials' marginally richer multiple aligns with its slightly higher projected long-term EPS growth.

For investors positioning around the AI data center build-out, the practical takeaway is that growth rates, catalysts and valuations largely converge: memory strength, advanced packaging demand and rising WFE spending lift both suppliers, and the June-July drawdown has compressed multiples on both without changing the demand picture either company reported.

With SEMI projecting equipment spending to climb from $166 billion this year to $229.5 billion in 2028, and both companies guiding to above-50% revenue growth for the current quarter, the competitive dynamics suggest the pullback, rather than the AI capex cycle, may prove the shorter-lived of the two.