Brad Gerstner Bought Applied Materials. A $16 Billion Hedge Fund Sold Nearly All of It. Who’s Right?

Two large funds took opposite positions in Applied Materials during the second quarter. According to Altimeter Capital's 13F for the quarter ended June 30, filed Aug. 14, the firm held 261,950 shares worth $189 million, or 1.9% of its 13F stocks, making it the 14th-largest of its 20 positions. Altimeter also opened positions in Lam Research ($171 million) and KLA ($175 million) that quarter, suggesting a broader bet on chip equipment rather than Applied alone. Maverick Capital, which manages $15.85 billion, went the other way. Applied was 3.4% of Maverick's 13F stocks at the end of March, but its June filing showed only 2,468 shares left, worth about $2 million. Both filings reflect holdings more than four months old and do not disclose when trades occurred or their prices.

Applied closed at $332.71 on Nov. 6, 54% below its June 30 close of $723, its highest close of the past year. The stock has been pressured by a chip-stock selloff that deepened after the midterms, while the company's Oct. 13 investor event set a 2030 target of a 54% non-GAAP gross margin but offered no forecast for the equipment market. Fundamentals have continued to improve. Third-quarter revenue rose 25% to $9.1 billion, management guided fourth-quarter revenue to $10.25 billion, plus or minus $500 million, up 51%, and non-GAAP gross margin reached 50.4%, the 13th straight quarter of year-over-year gains. Analysts expect normalized EPS to rise from $9.42 in fiscal 2025 to $18.56 in fiscal 2027 and $23.89 in fiscal 2028, with the fiscal 2027 estimate at $16.40 at the end of June.

Valuation has compressed as earnings expectations rose. Applied traded at 49x forward earnings on June 30, its five-year high, and now trades at 19x, below its 21x five-year average. TIKR notes that the consensus price target has risen from $222 to $628 over the past year, and even the lowest target of $358 sits above the Nov. 6 close. The article identifies cyclicality as the main risk: equipment booms can end when customers pause to absorb purchases, and two customers accounted for 34% of Applied's revenue in the first nine months of fiscal 2026. The stock fell to 9.6x forward earnings in October 2022 during a prior downturn. The TIKR analysis favors Altimeter's position, arguing that the stock trades below its usual multiple while estimates keep rising, though this is the author's opinion rather than a recommendation.

Applied reports fiscal fourth-quarter results on Nov. 12. Key metrics to watch include revenue near the $10.25 billion guidance, gross margin near 50.4%, and the first guidance for fiscal 2027's 14-week first quarter. By Nov. 16, both funds' Sept. 30 13F filings should show whether Altimeter held its position and whether Maverick re-entered.