Choosing between Applied Materials (NASDAQ:AMAT) and Advanced Micro Devices (NASDAQ:AMD) means weighing a highly profitable chip equipment supplier against a faster-growing chip designer.

Applied Materials makes the equipment that chip factories use to produce semiconductors. AMD designs processors for products ranging from game consoles to large data centers and relies on outside foundries to manufacture them. Both sell into the demand that has drawn investors to artificial intelligence (AI) stocks, but they offer very different risk and reward profiles.

The case for Applied Materials

Alongside its manufacturing equipment, Applied Materials sells related services and factory automation software. The company occupies a highly technical niche among semiconductor stocks, selling to the large manufacturers that fabricate chips. That customer base is concentrated, and two customers accounted for approximately 19% and 15% of net revenue in fiscal 2025, which ended in October 2025.

In fiscal 2025, revenue reached nearly $28.4 billion, up about 4.4% from the previous year. The company reported net income of roughly $7.0 billion for the same period. Revenue and pre-tax income both rose, but the net margin, which measures how much profit is kept from every dollar of sales, declined to approximately 24.7% from 26.4% as the provision for income taxes more than doubled.

As of Oct. 26, 2025, the debt-to-equity ratio was roughly 0.3x. That ratio compares total debt with shareholders' equity, and a figure this low points to a conservative approach to borrowing. The current ratio, which compares short-term assets to short-term liabilities, was approximately 2.6x. Free cash flow, which the company calculates as operating cash flow minus capital expenditures, totaled nearly $5.7 billion for the fiscal year.

The case for Advanced Micro Devices

AMD designs processors for data centers and personal computers, as well as the semi-custom chips inside game consoles. A small number of customers account for a large share of its revenue, and cloud and hyperscale data center operators buy a substantial portion of its data center products.

In October 2025, AMD signed an agreement with OpenAI to deploy 6 gigawatts of its graphics processing units (GPUs), and in February 2026 it announced a similar agreement with Meta Platforms (NASDAQ:META) covering up to 6 gigawatts. Its chips also power the PlayStation 5 from Sony (NYSE:SONY) and the Xbox Series S and X consoles from Microsoft (NASDAQ:MSFT).

In 2025, revenue reached about $34.6 billion, up about 34.3% from the previous year. Growth came from the data center segment, where revenue rose 32%, and from the client and gaming segment, where it rose 51%. Net income for the period was roughly $4.3 billion, with a net margin of about 12.5%, held down in part by research and development spending, which rose about 25% to $8.1 billion.

As of Dec. 27, 2025, the debt-to-equity ratio was approximately 0.05x on a total debt-to-shareholders' equity basis. The current ratio stood at nearly 2.9x, indicating ample capacity to cover short-term obligations. Free cash flow for the year was roughly $5.5 billion under AMD's own definition, which starts with operating cash flow from continuing operations and subtracts capital expenditures.

That measure excludes about $1.2 billion of operating cash flow from discontinued operations, the ZT Systems manufacturing business that AMD sold in October 2025. Stock-based compensation of about $1.6 billion equaled roughly 25% of operating cash flow from continuing operations. Because it is a non-cash expense added back to cash flow in the cash flow statement, it increases reported cash generation.

Risk profile comparison

Applied Materials faces significant risks from evolving export controls and trade policies, particularly those involving China, which accounted for about 30% of its revenue in fiscal 2025. On Feb. 11, 2026, the company agreed to pay $252.5 million to the U.S. Commerce Department to resolve allegations that certain customer shipments to China between November 2020 and July 2022 did not comply with export regulations.

The Justice Department and the Securities and Exchange Commission closed their related investigations without action. The semiconductor industry has also historically been cyclical. The company says AI-related demand is difficult to forecast, and shifting demand can pressure its margins and cash flow.

AMD sells into highly competitive markets against rivals such as Nvidia (NASDAQ:NVDA) and Intel (NASDAQ:INTC). The company relies on third parties to manufacture its chips, including Taiwan Semiconductor Manufacturing (NYSE:TSM) and GlobalFoundries (NASDAQ:GFS), so any disruption at these foundries would directly affect its ability to deliver products. U.S. export controls on its Instinct MI308 data center GPUs also restrict sales to China, and AMD's 2025 results included approximately $440 million of net inventory and related charges tied to those controls.

Dilution is another risk for AMD shareholders. The company has issued warrants to OpenAI and Meta Platforms, each covering up to 160 million shares at an exercise price of $0.01 per share, that vest as the customers reach GPU purchase milestones and AMD's stock reaches specified price targets.

Together, the warrants equal about 20% of the roughly 1.63 billion shares outstanding as of late July 2026, and none had vested as of June 27, 2026. On Sept. 28, 2026, AMD also announced an agreement to acquire World Labs, an AI model and research lab, in an all-stock transaction valued at approximately $8.2 billion.

Valuation comparison

Applied Materials carries the lower forward price-to-earnings (P/E) and price-to-sales (P/S) ratios, and AMD grew revenue much faster in 2025.

Valuation metrics include sourcing from Financial Modeling Prep (FMP) and may differ from other data providers.

Which stock would I buy in 2026?

Applied Materials looks like the better buy to me, though I'd treat it as a position to add to over time. Chip equipment demand moves in cycles, and the stock has already more than doubled in the past year.

What tips the comparison is how each business has trended since the full-year figures above. Applied Materials reported record revenue for its fiscal third quarter on Aug. 13, 2026. The midpoint of management's guidance for the quarter ending in October implies sales growth of about 50% from a year earlier, roughly twice the pace it posted just a year ago. AMD's revenue also grew about 50% in its second quarter, but its Aug. 4 outlook points to somewhat slower growth in the third quarter. The growth gap that supports AMD's richer multiples appears to be narrowing.

AMD shareholders also face a dilution question that Applied Materials shareholders don't. The warrants from OpenAI and Meta Platforms could add about a fifth to the share count if every milestone is met, and the pending World Labs purchase would be paid for in stock. The warrants are tied to large chip orders, so the trade may prove worthwhile, but it raises the bar for per-share results.

None of this makes AMD a stock to avoid. It is the bigger business with more direct exposure to AI computing, and for investors who hold a diversified portfolio for five years or more, there's room to own both.

Mike Schwenk has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Applied Materials, Globalfoundries, Intel, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

Choosing between Axsome Therapeutics (NASDAQ:AXSM) and Vertex Pharmaceuticals (NASDAQ:VRTX) means weighing aggressive revenue growth against established, highly profitable dominance in the global biotechnology market. Which is the better buy today?

Axsome focuses on central nervous system disorders with a rapidly expanding commercial portfolio, while Vertex is a cash flow powerhouse led by its cystic fibrosis treatments. Both companies represent different risk and reward profiles in the healthcare market, making them favorites for various types of investors.

The case for Axsome Therapeutics

Axsome Therapeutics focuses on developing and commercializing therapies for central nervous system conditions, including depression, migraine, and narcolepsy. As a growing player among biotech stocks, the company generates revenue from its approved products, Auvelity and Sunosi. It has recently resolved patent litigation for Sunosi through settlement agreements that establish a framework for generic entry starting in 2040, providing long-term clarity for that specific product line.

In FY 2025, revenue reached nearly $638.5 million, representing a significant growth of roughly 65.5% compared to the previous year. Despite this rapid expansion in sales, the company reported a net loss of approximately $183.2 million for the period. This net margin, which measures the percentage of revenue remaining as profit after all expenses, was a negative 28.7%, which was an improvement from deeper losses in prior years.

As of its December 2025 balance sheet, the debt-to-equity ratio is roughly 2.7x, meaning total debt is nearly three times the value of shareholder equity. The current ratio, which measures a company's ability to cover its short-term obligations with short-term assets, is approximately 1.4x. During FY 2025, free cash flow was negative $93.9 million, which is the cash remaining after the business paid for its operations and capital investments.

The case for Vertex Pharmaceuticals

Vertex Pharmaceuticals is a biotechnology leader known for its portfolio of medicines treating cystic fibrosis, such as Trikafta and Kalydeco. The company also markets therapies for sickle cell disease and has recently introduced Journavx for acute pain management. By maintaining extensive networks of authorized treatment centers and broad payer coverage, the business ensures its specialized therapies reach patients across global markets.

In FY 2025, revenue reached approximately $12.1 billion, which reflects a year over year growth of nearly 9.6%. The company is highly profitable, reporting net income of close to $4.0 billion for the fiscal year. This resulted in a net margin of approximately 32.7%, showing that Vertex retains nearly a third of its revenue as profit after accounting for all of its costs.

As of its December 2025 balance sheet, the debt-to-equity ratio is close to 0.2x, indicating that total debt is quite low relative to shareholder equity. Its current ratio is approximately 2.9x, suggesting a strong ability to meet short-term financial commitments with its existing assets. The company generated roughly $3.2 billion in free cash flow during FY 2025, which represents the cash left over after paying for operations and capital equipment.

Risk profile comparison

Axsome faces several operational and financial risks, including a history of net losses and a recurring need for additional funding to sustain its clinical trials. The company also deals with competition from generic versions of its products, such as recent regulatory filings for generic Auvelity and Symbravo. Regulatory hurdles remain a challenge, illustrated by a previous Refuse to File letter for its candidate AXS-14, alongside a heavy dependence on third-party manufacturers for supply.

Vertex contends with significant revenue concentration since most of its sales come from cystic fibrosis treatments, making it vulnerable to any manufacturing or safety disruptions in that area. Product development is complex and carries risks of failure, such as the setback for its VX-264 program. Furthermore, the company faces pricing pressures from government regulators and must successfully integrate acquisitions like Crinetics Pharmaceuticals and Alpine Immune Sciences while competing with CRISPR Therapeutics (NASDAQ:CRSP).

Valuation comparison

Vertex appears more conservatively valued based on its Forward P/E relative to future earnings estimates, while Axsome commands a higher P/S ratio measuring price against sales.

Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.

Which stock would I buy in 2026?

I'd go with Vertex Pharmaceuticals. It has built one of the most profitable and diversified drug portfolios in biotech, and the pipeline keeps expanding into new disease areas that could sustain that growth for years. Its cystic fibrosis franchise now treats the vast majority of patients living with the disease, and a new pain drug is gaining commercial traction alongside it. A recently completed acquisition adds a kidney disease drug awaiting an imminent FDA approval decision. The balance sheet is flush with cash, and management just raised its full-year outlook.

Axsome has quickly built a very strong commercial drug portfolio, with a new FDA approval for a condition affecting many Alzheimer's patients adding a promising new indication. For investors who want earlier-stage biotech exposure with commercial products already on the market, it is a good candidate.

The challenge for Axsome right now is that building a commercial drug business is expensive, and the costs are rising faster than the revenue. Missing estimates in the most recent quarter is a reminder that the path to profitability leaves little room for stumbles. Vertex faces no such uncertainty. It has already done the hard work of building a profitable, diversified business, and it keeps adding to it. That's why it's my pick.

Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Axsome Therapeutics and Vertex Pharmaceuticals. The Motley Fool recommends CRISPR Therapeutics. The Motley Fool has a disclosure policy.

As the demand for high-performance computing accelerates, investors often struggle to choose between the architects of chip design and the manufacturers of chipmaking hardware. Choosing between Arm (NASDAQ:ARM) and ASML (NASDAQ:ASML) requires understanding their distinct roles.

Arm licenses its intellectual property to hundreds of companies, earning royalties on nearly every smartphone sold globally. Meanwhile, ASML provides the essential machinery that allows foundries to print those designs onto silicon. Both companies are vital players among semiconductor stocks, but they offer different paths to growth.

The case for Arm

Arm operates a high-margin business model centered on licensing its compute platform and central processing unit designs. The company provides the fundamental blueprints that power the mobile world and is increasingly gaining traction in the automotive and cloud data center sectors. Because it does not manufacture physical chips, its asset-light model allows it to scale across the entire industry without the heavy costs of factory ownership.

In the fiscal year ended March 31, 2026, revenue reached nearly $4.9 billion, representing growth of approximately 22.8% compared with the prior fiscal year. The company reported a net income of roughly $904.0 million for the period. While its net margin of approximately 18.4% was slightly lower than the previous year, the company continues to see strong adoption of its latest architecture versions.

As of its March 2026 balance sheet, the current ratio stands at approximately 6.0x, which measures a company's ability to cover its short-term liabilities with its short-term assets. The debt-to-equity ratio, which compares total debt to shareholder equity, is roughly 0.1x. Note that stock-based compensation represented roughly 69% of operating cash flow, which inflates reported cash generation since SBC is a non-cash expense added back in the cash flow statement.

The case for ASML

ASML occupies a unique position as the sole provider of extreme ultraviolet lithography machines. These massive, highly complex tools are the only way for chipmakers to produce the smallest and most advanced transistors. This technological moat makes the company an indispensable partner for any foundry aiming to support modern artificial intelligence applications.

In the fiscal year ended Dec. 31, 2025, revenue reached nearly $37.1 billion, a growth of approximately 15.6% over the prior fiscal year. The company achieved a net income of close to $10.9 billion for the year. This resulted in a healthy net margin of approximately 29.4%, reflecting the premium pricing power that comes with its specialized equipment monopoly.

As of its December 2025 balance sheet, the current ratio is approximately 1.3x. Its debt-to-equity ratio is roughly 0.1x, suggesting a conservative use of leverage relative to its equity. The company generated approximately $12.1 billion in free cash flow, which is the cash remaining after a business pays for its operating expenses and capital expenditures.

Risk profile comparison

Arm faces risks related to the concentration of its architecture in the mobile market, where growth has slowed compared to earlier decades. The company also contends with the rise of open-source alternatives like RISC-V, which could eventually challenge its licensing dominance. Additionally, geopolitical tensions can impact its ability to license technology in certain sensitive regions, potentially limiting its total addressable market.

ASML is highly sensitive to the capital expenditure cycles of a few major chip manufacturers. If these customers delay their expansion plans, the company's hardware orders can experience significant volatility. Furthermore, international trade restrictions on advanced lithography tools, particularly regarding shipments to certain markets, remain a persistent challenge that could cap its long-term revenue potential.

Valuation comparison

ASML appears significantly cheaper on a relative basis when comparing both its premium to earnings and its valuation relative to total sales.

Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.

Which stock would I buy in 2026?

I'd go with ASML. Its position in the semiconductor industry is one of the most defensible in the world: It is the only company that makes the extreme ultraviolet lithography machines needed to produce the most advanced chips. Every chipmaker building AI hardware depends on ASML's equipment to do it, and there is no alternative. That kind of irreplaceable role in the global technology supply chain is extraordinarily rare.

There is a lot to like about how Arm makes its money. Its architecture powers virtually every smartphone, and royalty revenue more than doubled in the data center segment. This is a business that compounds reliably without depending on any single product cycle. For investors who value consistency and steady growth, it is a strong long-term hold.

Both companies benefit from the AI build-out, but from different angles. Arm earns a royalty when a chip is designed, while ASML earns revenue when that chip gets built. But as chip demand keeps growing, ASML sits at the only chokepoint in the entire supply chain that cannot be worked around. For a long-term investor, that is a compelling place to put your money.

Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML and Arm Holdings. The Motley Fool has a disclosure policy.

As artificial intelligence reshapes the global data landscape, infrastructure providers are seeing unprecedented demand. Investors must decide between the widespread architectural reach of Arm (NASDAQ:ARM) and the specialized connectivity of Credo Technology Group (NASDAQ:CRDO).

Arm provides the fundamental blueprint for processors found in billions of devices, while Credo focuses on the high-speed pathways that move data between servers. Both companies are essential to the expansion of modern computing, but they differ significantly in scale, growth rates, and how the market values their future potential.

The case for Arm

Arm designs the fundamental compute platforms that power almost every smartphone on Earth. Instead of manufacturing chips directly, the company licenses its intellectual property to other manufacturers, earning royalties and licensing fees. This capital-light model allows it to maintain a presence in over 350 billion chips worldwide while expanding into data centers and edge computing.

In FY 2026, revenue reached nearly $4.9 billion, representing a year-over-year increase of approximately 22.8%. The company reported net income of roughly $904.0 million for the period, which resulted in a net margin of close to 18.4%. This performance highlights the company's ability to maintain profitability as it gains traction in the semiconductor stocks market.

As of its March 2026 balance sheet, the debt-to-equity ratio is approximately 0.1x, which measures total debt relative to shareholder equity. The current ratio, a measure of a company's ability to pay short-term obligations, stands at nearly 6.0x. For the same fiscal period, free cash flow was close to $979.0 million. Note that stock-based compensation represented roughly 69% of operating cash flow, which inflates reported cash generation since SBC is a non-cash expense added back in the cash flow statement.

The case for Credo Technology Group

Credo Technology Group provides high-speed connectivity solutions that enable data to travel efficiently through modern AI data centers. The company sells specialized products like Active Electrical Cables and optical transceivers to major cloud providers. Key commercial partners include Oracle (NYSE:ORCL) and Microsoft (NASDAQ:MSFT). Customer concentration like this adds a layer of risk to the business, as the top ten customers represent roughly 90% of total revenue.

In FY 2026, revenue reached nearly $1.3 billion, a massive jump of approximately 205.7% from the previous year. The company posted net income of close to $472.3 million, resulting in a net margin of roughly 35.4%. This surge in revenue and profitability reflects the intense demand for high-speed connectivity as hyperscalers scale their artificial intelligence infrastructure.

As of its May 2026 balance sheet, the debt-to-equity ratio is 0.0x, indicating the company has no debt. Its current ratio is approximately 10.2x, suggesting a very strong liquidity position for covering immediate liabilities. Free cash flow for the period was close to $407.0 million. Note that stock-based compensation represented roughly 39.3% of operating cash flow, which inflates reported cash generation since SBC is a non-cash expense added back in the cash flow statement.

Risk profile comparison

Arm faces risks related to its high dependency on the smartphone market, where growth has historically been cyclical. It also faces increasing competition from open-source architectures, which offer royalty-free alternatives to its proprietary designs. Furthermore, geopolitical tensions involving international trade could impact its ability to license technology in key global markets.

Credo Technology Group deals with significant revenue concentration, meaning the loss of a single hyperscale customer could severely impact financial results. The company competes against well-established giants such as Broadcom (NASDAQ:AVGO), Marvell Technology (NASDAQ:MRVL), and Astera Labs (NASDAQ:ALAB). It also relies on a fabless model, depending on Taiwan Semiconductor Manufacturing Company (NYSE:TSM) for manufacturing, which exposes it to potential supply chain disruptions.

Valuation comparison

Credo appears more attractively valued than Arm, as it trades at much lower multiples of sales over the past twelve months and future earnings estimates.

Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.

Which stock would I buy in 2026?

I'd go with Credo Technology. The company has strung together one of the most impressive growth streaks in the semiconductor industry, with revenue approaching or exceeding triple digits for several consecutive quarters, gross margins above 70%, and guidance pointing to more than 85% revenue growth for the full year. Its connectivity chips and optical products are becoming essential inside the AI data centers being built by every major hyperscaler.

Arm's royalty model is one of the more durable business models in semiconductors. Its architecture powers virtually every smartphone and is rapidly expanding into AI data centers, with royalty revenue more than doubling in that segment. The business compounds reliably across billions of devices and does not depend on any single product cycle. For investors who value consistency above acceleration, it is a strong long-term hold.

Customer concentration is the one risk worth watching at Credo, since a handful of hyperscalers drive most of its revenue. But the demand behind those relationships keeps growing, and the results keep arriving ahead of expectations. For investors comfortable with that trade-off, Credo's growth trajectory is simply in a different league right now.

Sara Appino has positions in Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Arm Holdings, Broadcom, Marvell Technology, Microsoft, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Astera Labs. The Motley Fool has a disclosure policy.

Should you invest in the machines that build the chips or the company that designs them? Choosing between Applied Materials (NASDAQ:AMAT) and Broadcom (NASDAQ:AVGO) depends on your specific goals for 2026.

Applied Materials provides the heavy-duty equipment required to manufacture modern semiconductors, while Broadcom focuses on designing chips and enterprise software. Both companies are essential to global technology infrastructure, but they offer different paths to growth. This comparison evaluates their financials and risks to help you decide which stock is a better buy.

The case for Applied Materials

In its latest annual report, filed for the fiscal year ended in late 2025, Applied Materials described its leadership in materials engineering for the semiconductor industry. The company provides the essential equipment and software used by major manufacturers like Taiwan Semiconductor Manufacturing Company (NYSE:TSM) to build advanced chips. Customer concentration like this adds a layer of risk to the business, as two primary customers accounted for approximately 19% and 15% of its fiscal 2025 net revenue.

In FY 2025, revenue reached nearly $28.4 billion, indicating a growth rate of roughly 4.4% compared to the previous year. The company reported net income of approximately $7.0 billion for the same period. While revenue grew, net income slightly trailed the $7.2 billion reported in the prior fiscal year, reflecting slightly tighter net margins.

As of its October 2025 balance sheet, the debt-to-equity ratio was roughly 0.3x. This ratio measures total debt against shareholder equity, helping you understand how the company funds its operations. The current ratio, which measures the ability to cover short-term bills with current assets, was close to 2.6x. Free cash flow for the year was nearly $5.7 billion, representing the cash remaining after the business paid for its daily operations and equipment investments.

The case for Broadcom

In its latest annual report, Broadcom highlighted its evolution into a diversified infrastructure giant. The company is a key player among semiconductor stocks, designing chips for networking and wireless communication while expanding its software footprint. Major commercial developments include a massive chip commitment with Apple (NASDAQ:AAPL) and the integration of VMware to serve enterprise clients.

In FY 2025, revenue reached nearly $63.9 billion, representing a significant increase of approximately 23.9% over the previous year. Net income for the period was roughly $23.1 billion, a sharp rise from the $5.9 billion reported in FY 2024. This growth was largely driven by the full-year inclusion of software acquisitions and robust demand for artificial intelligence networking components.

As of its November 2025 balance sheet, the debt-to-equity ratio was approximately 0.8x. The current ratio was nearly 1.7x, suggesting a healthy balance between liquid assets and upcoming liabilities. Free cash flow for the fiscal year was close to $26.9 billion. Note that stock-based compensation represented roughly 27.5% of operating cash flow, which inflates reported cash generation since SBC is a non-cash expense added back in the cash flow statement.

Risk profile comparison

Applied Materials faces significant risks from international export controls, particularly regarding technology sales to China. These regulations can disrupt supply chains and limit access to one of its largest markets. Furthermore, the company is sensitive to the capital expenditure cycles of a small number of customers, making its revenue potentially volatile when those manufacturers reduce spending.

Broadcom relies heavily on a limited group of distributors and end customers, with five large buyers generating nearly 40% of its total revenue. The successful integration of large acquisitions like VMware is critical to its strategy, but it carries risks of legal costs and management distraction. The company also faces active antitrust scrutiny from regulators in the European Union regarding its software licensing practices.

Valuation comparison

Broadcom appears more attractively valued based on its lower multiple of future earnings estimates, while Applied Materials trades at a lower multiple of its total sales.

Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.

Which stock would I buy in 2026?

I'd go with Broadcom. Its custom AI accelerator business has become one of the most sought-after partnerships in the semiconductor industry, with supply commitments already secured to double AI revenue again next year. A customer roster that includes Google, Meta, OpenAI, and Anthropic is about as strong an endorsement as the AI industry offers, and free cash flow continues to expand alongside revenue.

Applied Materials is a well-run business with broad exposure across chip manufacturing equipment, and AI-driven demand for advanced semiconductors is pulling its orders forward. For investors who want diversified exposure to the chip manufacturing build-out without betting on any single end market, it is a solid choice.

But Applied Materials operates in a competitive landscape where customers have alternatives. Broadcom's hyperscaler relationships are deeper and harder to replicate, since once a major cloud company has designed its custom AI chip around Broadcom's architecture, the switching costs are enormous.

While most equipment companies win business one order at a time, Broadcom gets designed into the chip itself, which means the relationship only deepens as the customer scales. For a long-term investor, that compounding dynamic is very enticing.

Sara Appino has positions in Apple and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Apple, Applied Materials, Broadcom, Meta Platforms, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

As the artificial intelligence boom shifts from hype to hardware, choosing between Applied Materials (NASDAQ:AMAT) and ASML(NASDAQ:ASML) requires understanding the specialized tools that make modern computing possible.

These giants operate at different stages of the manufacturing process. While one provides a broad suite of materials engineering tools, the other holds a near-monopoly on the machines that print patterns on advanced chips.

The case for Applied Materials

Applied Materials sells a wide variety of equipment used to deposit, remove, and modify materials on silicon wafers. Its customers include global leaders in the foundry, logic, and memory markets who depend on these tools to build complex chip architectures. In fiscal 2025, two customers accounted for approximately 19% and 15% of net revenue, respectively, while a partnership with TSMC supports critical technology requirements for artificial intelligence.

In FY 2025, revenue reached nearly $28.4 billion, which represents growth of approximately 4.4% compared to the prior year. The company reported net income of close to $7.0 billion for the same period, demonstrating its ability to remain consistently profitable in a shifting market. This resulted in a net margin of 24.7%, which is a measure of how much profit is kept from every dollar of sales after all expenses are paid.

As of its October 2025 balance sheet, the debt-to-equity ratio was roughly 0.3x, which compares total debt to shareholder equity to show conservative borrowing levels. The current ratio, measuring the ability to pay short-term debts with short-term assets, was approximately 2.6x. Free cash flow, or the cash remaining after paying for capital expenditures, totaled nearly $5.7 billion and supports the company's ongoing research and development efforts along with its shareholder returns.

The case for ASML

ASML is the sole global provider of extreme ultraviolet (EUV) lithography systems used to print incredibly small patterns on the most advanced chips. By supplying these mission-critical machines to the broader semiconductor stocks landscape, the company has become an essential partner for every major manufacturer. Its proprietary technology is fundamental to the production of high-performance processors used in artificial intelligence and sophisticated mobile devices that require massive computing power.

In FY 2025, revenue reached close to $37.1 billion, representing growth of roughly 15.6% over the prior year. The company reported net income of approximately $10.9 billion during this fiscal year, showing substantial growth in its bottom line. It achieved a net margin of 29.4%, which shows that the business converts a high percentage of sales into actual profit for its shareholders after accounting for all operating costs.

As of its December 2025 balance sheet, the debt-to-equity ratio was approximately 0.1x, which indicates a very light debt load compared to its equity base. The company maintained a current ratio of roughly 1.3x, which compares short-term assets to short-term liabilities to assess the company's immediate liquidity. Free cash flow for the fiscal year reached nearly $12.1 billion, providing the company with ample capital to develop the next generation of high-aperture lithography machines.

Risk profile comparison

Applied Materials faces ongoing costs and scrutiny regarding export control compliance, including a $252 million settlement in February 2026. The business is highly sensitive to geopolitical trade tensions between the U.S. and China, which can disrupt supply chains. Furthermore, its reliance on a few large customers like Intel (NASDAQ:INTC) and competition from firms like KLA (NASDAQ:KLAC) makes it vulnerable to shifts in spending cycles.

ASML operates under strict export restrictions that limit its ability to sell advanced systems to certain markets, particularly China. Because its machines are incredibly complex, any disruption in its global supply chain can significantly delay deliveries and impact revenue. Additionally, the high cost of its next-generation machines may lead to slower adoption by customers like Advanced Micro Devices (NASDAQ:AMD).

Valuation comparison

Applied Materials looks cheaper than ASML based on its Forward P/E, which tracks price against earnings estimates, and its P/S ratio measuring sales over the past twelve months.

Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.

Which stock would I buy in 2026?

Although both companies are extraordinary, ASML is the clear winner here. Its position in the semiconductor industry is unlike almost anything else in the market: It is the only company in the world that makes the EUV machines needed to produce the most advanced chips. Every chipmaker racing to build AI hardware, from TSMC to Samsung to Intel, depends on ASML's equipment to do it. That kind of monopoly position is extraordinarily rare.

The most recent quarter backed that up convincingly. Revenue grew more than 20% year over year, the company raised its full-year outlook substantially, and AI-driven demand for advanced logic and memory chips keeps pulling orders forward.

Applied Materials is a strong business with broad exposure across chip manufacturing equipment. But it operates in a more competitive landscape where customers have alternatives. ASML has no real competition at the cutting edge of chip manufacturing. For investors thinking in years rather than quarters, owning that kind of irreplaceable position in the global technology supply chain is a straightforward long-term thesis.

Sara Appino has positions in Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Applied Materials, Intel, KLA, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

As healthcare costs and procedure volumes continue to shift globally, investors must decide between two titans of the industry. Choosing between Abbott Laboratories (NYSE:ABT) and Intuitive Surgical (NASDAQ:ISRG) requires weighing diversified stability against high-growth specialized technology.

Abbott provides a broad array of medical products used in daily care, while Intuitive focuses on the specialized niche of robotic-assisted surgery. These companies are often compared because they represent different ways to invest in the future of medical technology and hospital spending.

The case for Abbott Laboratories

Abbott Laboratories operates a diversified business model that spans diabetes care, cardiovascular devices, diagnostics, and nutrition. It sells products to a wide range of customers, including hospitals, wholesalers, and government agencies, which helps it weather fluctuations in any single market. In early 2026, the company entered a definitive agreement to acquire Exact Sciences to strengthen its presence in the cancer diagnostics market.

In FY 2025, revenue reached nearly $44.3 billion, representing a growth of roughly 5.7% compared to the previous year. The company reported net income of approximately $6.5 billion for the period, resulting in a net margin of close to 14.7%. This performance reflects steady demand across its various healthcare segments, particularly in its medical device and diagnostic divisions.

Abbott maintains a stable financial position with a debt-to-equity ratio of nearly 0.3x as of its December 2025 balance sheet. This ratio, which compares total debt to shareholder equity, suggests a conservative approach to borrowing. The company also reported a current ratio of roughly 1.6x, indicating it has enough short-term assets to cover its immediate liabilities. Free cash flow, or the cash left after paying for operating costs and capital expenditures, reached approximately $7.4 billion in FY 2025.

The case for Intuitive Surgical

Intuitive Surgical is the pioneer of robotic-assisted surgery, primarily through its da Vinci and Ion systems. The company operates a "razor and blade" business model, where the initial sale of a robotic system leads to years of recurring revenue from instruments, accessories, and maintenance services. Its primary customers are hospitals and ambulatory surgery centers, and it has recently expanded its direct sales reach into several European markets to improve its medical device stocks presence.

In FY 2025, revenue reached roughly $10.1 billion, which was a significant increase of approximately 20.5% over the prior year. Net income for the same period was close to $2.9 billion, yielding a strong net margin of nearly 28.4%. This robust profitability is driven by the high volume of surgical procedures performed using its installed base of robots worldwide.

As of its December 2025 balance sheet, the company has a debt-to-equity ratio of 0.0x, indicating that shareholder equity far exceeds its total debt. Its current ratio stands at approximately 4.9x, showing a very high level of liquidity to meet short-term obligations. Free cash flow for FY 2025 was nearly $2.5 billion. Note that stock-based compensation represented roughly 26% of operating cash flow, which inflates reported cash generation since SBC is a non-cash expense added back in the cash flow statement.

Risk profile comparison

Abbott Laboratories faces risks related to its complex manufacturing and supply chain, particularly its reliance on single-source suppliers for certain products. The company is also dealing with significant ongoing litigation involving product liability claims for infant formula and potential False Claims Act allegations. Intense competition from rivals like Medtronic (NYSE:MDT) and Johnson & Johnson (NYSE:JNJ) means Abbott must constantly innovate to protect its market share in the medical device and diagnostics sectors.

Intuitive Surgical faces competition from alternative surgical approaches and new robotic entrants like Medtronic and SS Innovations International (NASDAQ:SSII). Macroeconomic pressures could lead hospitals to tighten their capital spending budgets, potentially delaying the purchase of expensive new robotic systems. Additionally, the company is vulnerable to supply chain issues involving rare earth elements and must navigate increasingly strict global regulations regarding AI-enabled medical devices and patient data privacy.

Valuation comparison

Abbott Laboratories appears to be the more conservatively priced option, while Intuitive Surgical carries a higher premium due to its faster revenue growth.

Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.

The Forward P/E ratio compares the current stock price to future earnings estimates, while the P/S ratio measures the market value against sales over the past twelve months.

Which stock would I buy in 2026?

I'd go with Intuitive Surgical. Its installed base of nearly 12,000 da Vinci surgical systems is a major, durable competitive advantage in healthcare. Once a hospital has trained its surgeons on the platform and built its workflows around it, switching is rarely worth the disruption. Recurring revenue accounts for roughly 85% of total revenue, procedures grew at a strong double-digit rate in the most recent quarter, and the company beat earnings estimates by a wide margin while raising its gross margin outlook.

Abbott Laboratories deserves credit for running a well-diversified healthcare business across medical devices, diagnostics, and nutrition, and its acquisition of Exact Sciences adds a more exciting diagnostics story. For investors who want broad healthcare exposure alongside a growing dividend, it is a solid choice.

But Intuitive is growing faster, with a more focused business and a platform that keeps deepening its relationships with every hospital that adopts it. For a patient investor, that compounding advantage is worth owning.

Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories, Intuitive Surgical, and Medtronic. The Motley Fool recommends the following options: long January 2028 $520 calls on Intuitive Surgical and short January 2028 $530 calls on Intuitive Surgical. The Motley Fool has a disclosure policy.