Semiconductor capital equipment spending is likely to exceed market expectations in 2026, potentially paving the way for further growth for one of the companies discussed.
Spending on artificial intelligence (AI) cybersecurity could double this year, so it might be a good time to buy this beaten-down cybersecurity stock.
10 Stocks We Like More Than Applied Materials ›
The Nasdaq Composite has amassed impressive overall gains of 111% over the past three years, outpacing the 74% increase in S&P 500 in the same period. The Nasdaq’s outperformance is the result of healthy growth in the technology sector, driven primarily by the adoption of artificial intelligence (AI) across multiple industries.
It won’t be surprising to see the technology-focused Nasdaq Composite Index rise further in 2026. After all, global AI spending is poised to hit $2.5 trillion this year, according to Gartner. That would be an increase of almost 44% from last year. In addition, global AI spending is projected to grow by another 32% in 2027.
That’s why now is a good time to take a closer look at some tech stocks poised to benefit from higher AI spending in 2026 and potentially deliver healthy gains for investors.
Image source: Getty Images.
Semiconductor Manufacturing Equipment Company Stock Applied materials(NASDAQ: AMAT) they are up 72% in the last six months. This is not surprising as there is healthy demand for chip manufacturing equipment, driven by robust demand for AI-specific semiconductors. Market research firm Omdia estimates that semiconductor industry revenue could grow nearly 31 percent this year to more than $1 billion.
However, there is a shortage of both logic chips and memory, as evidenced by recent results from Taiwan Semiconductor Manufacturing and Micron technology. This is why demand for chip manufacturing equipment will increase in 2026. According to industry association SEMI, sales of semiconductor equipment could increase to $145 billion in 2026, up from $133 billion last year. However, don’t be surprised to see more growth.
TSMC, for example, is on track to increase its 2026 capital expenditures (capex) by $13 billion in the middle of its guidance range. Meanwhile, Micron plans to raise its investments to $20 billion in the current fiscal year from just under $14 billion in the previous fiscal year, an increase of $6 billion. So the actual growth in semiconductor equipment spending this year could be much higher than SEMI anticipates.
That could pave the way for potentially stronger growth at Applied Materials. The company’s revenue in fiscal 2025 (which ended Oct. 26) rose 4 percent to a record $28.4 billion. Consensus estimates don’t see much growth in Applied Materials’ revenue this fiscal year, but its growth is expected to pick up next year.
Data by YCharts.
However, don’t be surprised to see Applied Materials beating expectations in the current fiscal year due to the favorable scenario in the semiconductor equipment space. With Applied Materials trading at 9x sales right now, roughly in line with the US tech sector’s average sales multiple, there’s a chance this semiconductor stock could trade at a premium multiple if it can beat consensus estimates.
This could pave the way for more upside in this Nasdaq stock, which is why it might be a good idea to buy it before it goes up.
SentinelOne(NYSE:S) had a 2025 to forget. The cybersecurity specialist’s share price fell 32% last year as the company failed to meet Wall Street’s quarterly expectations. It’s worth noting that SentinelOne traded down about 19% in 2024 as well.
However, the pullback means investors can buy this cybersecurity stock at 4.6 times sales and 38.6 times forward earnings. That could turn out to be a smart move, as SentinelOne has seen healthy revenue and earnings growth driven by the company’s AI-focused offerings that are gaining traction with customers.
SentinelOne made a smart move last year by acquiring Observo AI for $225 million. The company made the move to enhance its real-time threat detection capability by contributing to SentinelOne’s artificial intelligence-powered Singularity product platform. Singularity is a native AI platform that helps customers predict and proactively address cyber threats using real-time data.
Importantly, SentinelOne management noted on the company’s December earnings call that Singularity is helping it win substantial contracts and build a solid revenue pipeline. The latest acquisition should help SentinelOne further strengthen this platform, potentially improving cross-selling opportunities and attracting new customers.
A look at the company’s recent results for the third quarter of fiscal 2026 (which ended Oct. 31) reveals that its revenue rose 23% year-over-year to $259 million. Remaining performance obligations (RPOs), however, grew at a faster rate of 35% year-over-year to $1.3 billion.
RPO refers to the total value of contracts that a company has not yet fulfilled at the end of a period. So the higher growth in this metric compared to SentinelOne’s revenue growth is proof that it’s getting more business than it’s delivering. The larger contracts also have a positive impact on the margin profile, boosting the non-GAAP (generally accepted accounting principles) net income margin to 9.6% in the previous quarter, from breakeven in the year-ago period.
As such, it won’t be surprising to see SentinelOne’s growth exceed expectations going forward, especially given the impressive jump in pipeline.
Data by YCharts.
Even better, the stock’s average 12-month price target of $20.50 points to a 48% upside from current levels, according to 39 analysts covering SentinelOne. The company could indeed make such gains as it pulls the right strings to capitalize on the AI-focused cybersecurity market, which is expected to double in size this year to $51 billion, according to Gartner.
Before buying stock in Applied Materials, consider the following:
The Motley Fool Stock Advisor the analyst team has just identified what they think they are 10 best stocks for investors to buy now…and Applied Materials was not one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you would have $464,439!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you would have $1,150,455!*
Now, it’s worth noting Stock advisor the total average yield is 949% — a market-crushing outperformance compared to 195% for the S&P 500. Don’t miss the latest top 10 list, available with Stock advisorand join an investor community created by individual investors for individual investors.
See the 10 stocks »
*The Equity Advisor returns as of January 25, 2026.
Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Applied Materials, Micron Technology, SentinelOne and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
The top two Nasdaq stocks to buy before it soars in 2026 was originally published by The Motley Fool
