Applied Materials vs. Nvidia: Which Tech Stock Is a Better Buy in 2026? | The Motley Fool
As the digital world expands, investors are looking for the best ways to profit from the chips powering everything from smartphones to artificial intelligence. With that in mind, should you choose Applied Materials (AMAT +6.51%) or Nvidia (NVDA +1.34%)?
Applied Materials provides the specialized equipment needed to build modern chips, while Nvidia designs the high-performance hardware that processes AI workloads. Both companies are central to the global tech ecosystem, but they occupy different stages of the production cycle. This comparison looks at their business models and financials to help you decide.
The case for Applied Materials
Applied Materials sells materials engineering solutions used to manufacture chips and advanced displays. It serves the global semiconductor industry, focusing on foundry, logic, and memory markets. Two major customers accounted for roughly 19% and 15% of net revenue in its most recent fiscal year.
In the fiscal year ended Oct. 26, 2025, according to its latest annual report, revenue reached nearly $28.4 billion. This was an increase of approximately 4.4% compared with the prior year. The company reported net income of roughly $7 billion, which resulted in a net margin of about 24.7%, representing the portion of revenue remaining after all expenses.
As of Applied Materials’ October 2025 balance sheet, the debt-to-equity ratio was approximately 0.3. This ratio measures total debt against shareholder equity to evaluate financial leverage, with lower numbers generally suggesting less risk. The current ratio was nearly 2.6, meaning short-term assets comfortably covered short-term liabilities. Free cash flow, which is cash from operations minus capital expenditures, was close to $5.7 billion in the fiscal year ended Oct. 26, 2025.
The case for Nvidia
Nvidia designs hardware and software for accelerated computing, primarily serving data centers and AI researchers. It relies on third-party foundries for all its manufacturing needs, and two direct customers accounted for nearly 22% and 14% of its total revenue in the latest fiscal year. These partnerships are crucial for its ongoing dominance in the broader technology sector, but customer concentration like this adds a layer of risk to the business.
In the fiscal year ended Jan. 25, 2026, according to its latest annual report, revenue reached approximately $215.9 billion. This was a massive increase of nearly 65.5% compared with the prior year. Net income came in at roughly $120.1 billion, representing a net margin of close to 55.6%, indicating the company kept over half of its revenue as profit during the period.
According to Nvidia’s latest annual report, the debt-to-equity ratio was roughly 0.1 as of its January 2026 balance sheet. This suggests very little debt relative to its equity. Its current ratio was approximately 3.9, indicating strong liquidity and the ability to meet upcoming obligations. Free cash flow was nearly $96.7 billion in the fiscal year ended Jan. 25, 2026.
NVDA & AMAT: Performance Comparison
NVDA – Nvidia
$222.27
+1.34% (+$2.93)
AMAT – Applied Materials
$444.57
+6.51% (+$27.17)
Key Financial Metrics
NVDA – Nvidia
$222.27
+1.34% (+$2.93)
AMAT – Applied Materials
$444.57
+6.51% (+$27.17)
Market Cap
$5.4T
52wk Range
$164.27 – $236.54
Gross Margin
74.67%
P/E Ratio
28.10
EPS (TTM)
$7.91
Dividend & Yield
$0.52 (0.23%)
Market Cap
$353B
52wk Range
$192.43 – $739.67
Gross Margin
49.40%
P/E Ratio
38.33
EPS (TTM)
$11.60
Dividend & Yield
$1.98 (0.45%)
NVDA – Nvidia
$222.27
+1.34% (+$2.93)
Market Cap
$5.4T
52wk Range
$164.27 – $236.54
Gross Margin
74.67%
P/E Ratio
28.10
EPS (TTM)
$7.91
Dividend & Yield
$0.52 (0.23%)
AMAT – Applied Materials
$444.57
+6.51% (+$27.17)
Market Cap
$353B
52wk Range
$192.43 – $739.67
Gross Margin
49.40%
P/E Ratio
38.33
EPS (TTM)
$11.60
Dividend & Yield
$1.98 (0.45%)
Risk profile comparison
Applied Materials faces significant exposure to shifting U.S. and international export controls, especially regarding China. It recently reached a $252 million settlement in February 2026 related to prior exports to Semiconductor Manufacturing International. The business is also sensitive to the capital investment cycles of its limited customer base, while intellectual property theft and cybersecurity threats remain persistent concerns.
Nvidia relies heavily on a small number of third-party suppliers like Taiwan Semiconductor Manufacturing (TSM +1.02%) for its production needs. Any geopolitical conflict in the regions where these suppliers operate could severely disrupt the supply of its advanced chips. Evolving export restrictions have previously caused inventory write-offs, and the company also faces ongoing antitrust inquiries and legal challenges related to its revenue disclosures.
Valuation comparison
Nvidia appears cheaper based on forward P/E, which uses future earnings estimates, while Applied Materials looks more attractive when measured by its P/S ratio.
| Metric | Applied Materials | NVIDIA |
|---|---|---|
| Forward P/E | 35.4 | 23.9 |
| P/S ratio | 12.7 | 24.8 |
Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.
Which stock would I buy in 2026?
While they share an industry, these companies couldn’t be more different. Nvidia is the biggest company in the world, and it’s been putting up eye-popping growth despite facing extremely tough comparisons.
Applied Materials simply isn’t in the same league, and its shares are also more expensive on a forward basis. The chip designer’s stock has also vastly outperformed Applied Materials’.
That being said, the artificial intelligence boom is showing potential signs of slowing, and that would have a massive impact on Nvidia’s growth. Current and former frontier lab employees have recently spoken out against AI in extremely dire ways (I’m paraphrasing, but basically, “It’s going to kill us all if we don’t stop it.”). Now, that could mean lots of potential things, including we get murdered by robot overlords, at which point Nvidia’s earnings will cease to matter. On the other hand, it could actually be masking a different problem: The AI, it turns out, is not very good, and they need a reason to cease developing it because they cannot continue to light money on fire. If AI development slows or stops, that’s very bad news for Nvidia.
Furthermore, the potential AI murderbot issue has recently attracted the attention of lawmakers in Congress. Regulation or even the threat of it would likely have a negative impact on Nvidia shares.
I think Nvidia’s fortunes are so inextricably linked to the AI boom that if anything disrupts the rosy AI narrative, Nvidia shareholders will be feeling the pain. Applied Materials is boring and safe. Sign me up.
