Morgan Stanley downgraded Applied Materials from Overweight to Equal Weight on May 18, 2026. The firm also removed the company as its Top Pick in the wafer fabrication equipment sector.
Applied Materials shares fell nearly 1% in Monday premarket trading. Analysts indicated that the company's valuation is unlikely to improve relative to its peers in the near term.
The downgrade follows Applied Materials' recent report of record second-quarter revenue. While high demand for AI infrastructure led other firms to raise price targets, Morgan Stanley maintains a cautious view on the stock's immediate potential.