Bank of America just slapped a $720 price target on Applied Materials (AMAT), up from $540, while keeping its Buy rating intact. The semiconductor equipment giant closed at $585.88 on the day of the upgrade, meaning BofA sees roughly 23% upside from current levels.

Here’s the thing: the stock actually dropped about 8% on the same day the price target went up.

The $2.7 trillion bet

The bank expanded its projected total addressable market for semiconductors to $2.7 trillion by 2030. That’s up from a prior estimate of $2.3 trillion, a $400 billion revision that signals serious confidence in where the industry is headed.

Two forces are driving that expanded forecast: memory chips and data center buildouts. Both are essential infrastructure for AI technologies.

Applied Materials makes the equipment that manufacturers use to produce high-performance logic and memory chips. The company recently unveiled new systems for deposition, selective etching, and hybrid bonding. These technologies target DRAM production, AI chip development, and advanced semiconductor packaging.

BofA wasn’t alone in its optimism. Several other financial institutions raised their price targets for AMAT during the same period.

The crypto hardware connection

Applied Materials has an interesting, if increasingly quiet, relationship with the crypto industry. Back in 2021, BofA included AMAT on its list of firms relevant to crypto-related research. Current analyst coverage focuses almost exclusively on AI technologies rather than blockchain or mining applications.

What this means for investors

The gap between AMAT’s closing price of $585.88 and BofA’s $720 target represents meaningful potential upside. The stock’s same-day decline of approximately 8% suggests that some investors may be questioning whether the semiconductor bull case has gotten ahead of itself.

Applied Materials isn’t the only semiconductor equipment maker benefiting from AI tailwinds. Companies like ASML, Lam Research, and KLA Corporation all compete for the same capital spending budgets from chipmakers. AMAT’s new product launches in DRAM and advanced packaging suggest the company is positioning aggressively.

The semiconductor industry has historically been cyclical, prone to boom-and-bust patterns. The question for anyone considering AMAT at these levels is whether AI demand represents a structural shift that breaks the cycle. BofA is betting on the former.