ASE Technology HoldingASX and Applied MaterialsAMAT are both important players in the semiconductor industry, but operate in different parts of the supply chain. ASE Technology is a major player in outsourced semiconductor assembly and testing, offering advanced packaging and testing services for AI, high-performance computing and automotive chips, while Applied Materials is one of the world's largest suppliers of semiconductor manufacturing equipment.
Both ASX and AMAT are well-positioned to benefit from the rising demand for AI chips, as hyperscalers continue to increase investments in AI infrastructure. However, from an investment point of view, one stock offers a more favorable outlook than the other right now. Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which stock offers a more compelling investment case.
The Case for ASE Technology Stock
ASE Technology is seeing strong demand for its leading-edge advanced packaging and testing (LEAP) services, driven by growing AI infrastructure needs. In the first half of 2026, the company’s ATM revenues increased 35% year over year, with leading-edge advanced packaging and testing growing faster than the overall business. ASX expects this momentum to continue in the second half of 2026 and now projects ATM revenues to grow 35% in 2026.
LEAP services are a key driver of this growth. ASX previously expected LEAP revenues of $3.5 billion in 2026. Following strong demand, management now expects LEAP revenues to be a couple of hundred million dollars above this level. The company is also aiming to double LEAP revenues in 2027. Management said customer demand remains strong and it has clear visibility into the capacity needed for 2027. Both assembly and testing are seeing strong demand, while the expansion of full-process packaging is expected to provide another growth opportunity.
The higher contribution from LEAP is also helping ASX improve margins. In the second quarter of 2026, ATM revenues reached a record TWD 126.1 billion, up 36% year over year. The ATM business accounted for 66% of consolidated revenues and 94% of operating profit. ATM gross margin increased to 27.3% from 21.9% a year ago, helped by higher utilization and a greater mix of LEAP services. ASX expects ATM gross margin to improve further and could exceed 30% in the fourth quarter of 2026.
ASX is spending more to add capacity and meet demand. The company raised its 2026 capital expenditure plan by $2 billion to about $10.5 billion. Of the $6.5 billion planned for equipment, about 70% is for leading-edge operations. If ASX can bring new capacity online as planned, strong LEAP demand should continue to support its revenue growth and margin expansion.
The Case for AMAT stock
Applied Materials is seeing strong demand for advanced packaging as AI drives the need for faster and more efficient computing systems. The company expects advanced packaging to remain a key growth area as chipmakers increase investments in high-bandwidth memory (HBM), 3D chiplets and other technologies that improve chip performance and power efficiency.
AMAT expects its overall packaging revenues to grow more than 70% in 2026. In the third quarter of fiscal 2026, management said leading-edge foundry-logic, DRAM and advanced packaging could together account for around 80% of wafer fab equipment growth in 2026 and 2027. AMAT has strong positions in HBM packaging and 3D chiplet stacking, which should help it benefit from these trends. The company also launched new products during the third quarter, including Opta Quad CMP and two new e-beam systems for advanced packaging.
AMAT is investing in newer packaging technologies that could support growth beyond 2026. The company is developing solutions for larger panel formats and expects significant growth in panel revenues next year. Hybrid bonding is another opportunity, as chipmakers look to shorten wiring distances and improve performance and power efficiency. AMAT said its hybrid bonding technology and related products could become meaningful growth drivers over time.
However, China remains a key risk due to AMAT's significant exposure to the market. China accounted for 26% of Semiconductor Systems and AGS revenues in the third quarter of fiscal 2026. This concentration increases sensitivity to export license outcomes, rule changes and enforcement actions. Any slowdown in Chinese semiconductor spending or tighter restrictions on semiconductor equipment could weigh on AMAT's overall growth.
How do Earnings Estimates Compare for ASX & AMAT?
The Zacks Consensus Estimate for ASX’s 2026 EPS is pegged at $1.21, revised up by 8% over the past 30 days, indicating year-over-year growth of 112.3%.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for AMAT’s fiscal 2026 EPS is pegged at $12.65, revised up by 3.5% over the past seven days, indicating year-over-year growth of 34.3%.
Image Source: Zacks Investment Research
ASX vs. AMAT: Price Performance and Valuation
Year to date, shares of ASX and AMAT have surged 126.2% and 99%, respectively.
ASX Vs. AMAT: YTD Price Return Performance
Image Source: Zacks Investment Research
Currently, ASX is trading at a forward 12-month P/E ratio of 21.89X, lower than AMAT’s forward 12-month P/E multiple of 32.16X. ASX’s reasonable valuation makes it more attractive for investors looking for value and stability.
ASX vs. AMAT: Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
Conclusion: ASX Has an Edge Over AMAT
Both ASX and AMAT are benefiting from growing demand for AI chips and advanced packaging. However, risks and uncertainties related to trade restrictions on exporting semiconductor tools to China do not bode well for AMAT. In contrast, ASE Technology continues to benefit from strong demand for AI chip packaging, supported by growing LEAP demand and improving ATM margins. Further, ASX’s reasonable valuation offers some downside protection as well, giving the stock a clear edge over AMAT.
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