Applied Materials (NYSE: AMAT) is trading near its 52-week high at around $319 per share. The stock has risen as investors grow confident in the AI-driven semiconductor spending cycle. As a major supplier of chipmaking equipment, Applied Materials often benefits early when chipmakers increase investment.
However, buying a stock at a high price can limit future returns. With AMAT already reflecting strong optimism, some investors are asking whether it still offers good long-term value. The key question is how to invest in a strong company while reducing downside risk.
One smart approach is to aim for AMAT at a lower price instead of buying it outright today. If investors believe the stock would be attractive around $220 per share, they can structure a trade that earns income while waiting for that level.
This strategy involves selling a long-dated put option with a $220 strike price and a January 2027 expiration. By doing this, investors collect about $1,795 in premium per contract. That equals an annualized return of roughly 8.2% on the cash set aside for the trade.
If AMAT stays above $220, the option expires worthless. The investor keeps the full premium and never buys the stock. If the shares fall below $220, the investor buys AMAT at that price, but the premium lowers the effective cost to about $202 per share.
This approach works best when investors are confident in the company’s long-term outlook. Applied Materials has strong fundamentals, steady cash flow, and a solid balance sheet. It also benefits from long-term trends such as AI, 5G, electric vehicles, and advanced manufacturing.
The company has a strong competitive position due to high switching costs. Chipmakers rely on AMAT’s equipment and services, and changing suppliers is costly and complex. Its growing services and subscription business adds recurring revenue and improves stability.
While the semiconductor industry is cyclical and faces geopolitical risks, long-term demand remains strong. For investors who believe in Applied Materials but want more protection, this strategy offers income today and the chance to buy a high-quality stock at a meaningful discount.
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