Applied Materials vs. Amkor Technology: Which Artificial Intelligence Stock Is a Better Buy in 2026?

As the semiconductor chip industry matures, choosing between hardware providers and service partners becomes vital. Should you buy Applied Materials (NASDAQ:AMAT) or Amkor Technology (NASDAQ:AMKR) to capture the next wave of innovation?

Applied Materials provides the complex machinery required to build silicon wafers, while Amkor Technology specializes in the final assembly and testing of those chips. Both companies are critical links in the global electronics supply chain, but they operate at different stages of production and carry distinct financial profiles for investors looking at the technology market.

Applied Materials provides specialized equipment, services, and software used to manufacture semiconductors, including display systems for advanced electronics. Its technology serves foundries, which are the factories that produce chips, and it remains a prominent name among semiconductor stocks. While two clients accounted for approximately 19% and 15% of net revenue recently, a new 10-year partnership with Taiwan Semiconductor Manufacturing Company aims to secure its role in advanced AI packaging.

In its 2025 fiscal year (FY), revenue reached $28.4 billion, representing growth of 4.4% compared to the prior fiscal year. The company reported net income of $7.0 billion, which was a slight decrease from the $7.2 billion earned in the previous period. This resulted in a net margin of 24.7%, which measures the percentage of revenue remaining as profit after all operating and non-operating expenses are paid.

As of its October 2025 balance sheet, the debt-to-equity ratio is 0.3x, which measures total debt against shareholder equity to show how much the company relies on borrowed money. The current ratio, which compares short-term assets to short-term liabilities, is 2.6x. Free cash flow reached $5.7 billion, representing the cash remaining after the company pays for its operations and capital expenditures.

Amkor Technology is a leader in outsourced semiconductor assembly and test services, providing essential packaging for the communication, automotive, and industrial markets. Its top ten customers account for 72% of sales, with Apple and Qualcomm representing 29.8% and 11.1% of revenue, respectively. Customer concentration like this adds a layer of risk to the business. The company recently finalized a 10-year agreement to expand its advanced testing capabilities in Arizona.

In FY 2025, revenue reached $6.7 billion, which was an increase of 6.2% over the previous fiscal year. The company reported net income of $373.9 million, showing growth from the $354.0 million reported in FY 2024. Its net margin was 5.6%, reflecting the portion of total sales converted into profit after the company covers its manufacturing and service costs.

As of its December 2025 balance sheet, the debt-to-equity ratio is 0.4x, which compares total debt to shareholder equity to assess financial leverage. The current ratio is 2.3x, indicating the company has $2.30 in short-term assets for every $1.00 in short-term liabilities. Free cash flow for the year was $191.0 million, representing the surplus cash generated from operations after accounting for investments in physical assets.

Applied Materials remains highly vulnerable to international export controls, especially regarding technology sales to China. It recently settled export violation claims for $252 million in February of 2026. Additionally, an investigation into potential federal securities law violations and the cyclical nature of hardware demand pose ongoing risks to its financial stability.

Amkor faces significant risks from its reliance on a few major customers, as a loss of orders from its largest client could materially harm its financial results. The company also faces challenges with its Arizona plant expansion, including construction hurdles and strict requirements for government funding under the CHIPS Act. Furthermore, during industry downturns, customers might move packaging in-house to save costs, which threatens the demand for outsourced services.

Amkor Technology looks cheaper based on its P/S ratio, which compares market value to sales, while Applied Materials carries a higher Forward P/E based on future earnings estimates.

Sector benchmark uses the SPDR XLK sector ETF. Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.

Both Applied Materials and Amkor Technology experienced substantial share price increases in 2026 thanks to artificial intelligence. The AI sector's rapid expansion delivered record revenues for these companies in their most recent quarterly reports, making it a challenge to pick just one to invest in.

Applied Materials posted 11% year-over-year sales growth to $7.9 billion in its fiscal second quarter ended April 26. After a strong earnings result, the company now anticipates its semiconductor equipment business to grow more than 30% this year on the back of robust AI-driven demand.

Amkor Technology achieved outstanding year-over-year revenue growth of 27% to $1.7 billion in Q1. The company shared that the $6.7 billion earned in 2025 is expected to soar to $11 billion by 2030 as AI's need for advanced packaging solutions drives long-term growth.

Given how each company's business is shaping up, and the key roles they play in the AI ecosystem, investing in both Applied Materials and Amkor Technology is ideal. But if you had to choose one, Amkor is the better buy right now. Its stock's price-to-sales ratio and forward earnings multiple are substantially lower than Applied Materials, suggesting it is a better value.

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Robert Izquierdo has positions in Apple, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Apple, Applied Materials, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

Applied Materials vs. Amkor Technology: Which Artificial Intelligence Stock Is a Better Buy in 2026? was originally published by The Motley Fool