Applied Materials vs. SK Hynix: Which Technology Stock Is a Better Buy in 2026?

The AI boom puts Applied Materials (NASDAQ:AMAT) and SK Hynix (NASDAQ:SKHY) at the center of the chip race. Choosing between the equipment giant and the memory leader depends on your goals for 2026.

Applied Materials provides the essential tools used to build semiconductors, while SK hynix produces the memory chips that store and move data. Both companies are critical to the global supply chain, yet they operate in different niches. This comparison explores their financial health and market positions to help you determine which stock better fits your strategy.

The case for Applied Materials

Applied Materials leads the materials engineering sector by providing the equipment and services required to deposit, shape, and analyze materials with atomic precision for chipmaking. It recently expanded its collaboration with Intel (NASDAQ:INTC) to advance AI technologies and maintains a strategic partnership with TSMC to meet growing foundry demand. Two specific partners account for approximately 19% and 15% of revenue, and such customer concentration adds a layer of risk to the business.

In FY 2025, revenue reached nearly $28.4 billion, representing a growth of roughly 4.4% as the company benefited from increased demand for logic and foundry equipment. Net income for the period was approximately $7.0 billion, resulting in a net margin of close to 24.7%. This figure reflects a slight decrease from the 26.4% net margin recorded in FY 2024, yet it remains significantly higher than the levels seen in FY 2023.

As of its October 2025 balance sheet, the debt-to-equity ratio is approximately 0.3x, calculated as total debt (short-term plus long-term) divided by shareholders' equity. The current ratio is roughly 2.6x, indicating the company can comfortably cover its short-term liabilities with current assets. Free cash flow, calculated as cash from operations minus capital expenditures, reached nearly $5.7 billion for the fiscal year.

The case for SK Hynix

SK Hynix focuses on the memory side of the industry, producing the DRAM and NAND Flash components essential for modern data storage and processing. As the artificial intelligence boom continues to fuel demand for semiconductor stocks, the company is pursuing a "Full Stack AI Memory" strategy. This approach focuses on high-bandwidth memory and next-generation storage for data centers to capture a larger share of global digital infrastructure spending.

In FY 2025, revenue reached nearly $72.5 billion, representing a massive growth of approximately 46.8% as the company capitalized on a recovery in memory prices. Net income for the same period was close to $32.1 billion, resulting in a net margin of roughly 44.2%. This performance is a sharp recovery from FY 2023, when the company reported a significant net loss during a memory market downturn.

As of its December 2025 balance sheet, the company has a debt-to-equity ratio of nearly 0.2x, calculated as total debt (short-term plus long-term) divided by shareholders' equity. The current ratio is approximately 1.9x, indicating the company's ability to pay its immediate debts using its current assets. Free cash flow for the year totaled nearly $18.5 billion, defined as cash from operations minus capital expenditures.

Risk profile comparison

Applied Materials faces significant risks related to export controls and trade regulations, particularly concerning shipments of advanced equipment to China. The company recently settled a $252 million penalty for unauthorized exports to Semiconductor Manufacturing International Corporation and remains under government scrutiny. Furthermore, its business is highly cyclical and sensitive to the spending plans of a small number of major chipmakers.

SK Hynix operates in the volatile memory market, where prices for products like DRAM can fluctuate wildly based on global supply and demand. It faces intense competition from rivals such as Samsung Electronics and Micron Technology, which are also scaling up production for high-growth AI applications. If these competitors create a market glut, it could lead to lower prices and compress the company's net margin.

Valuation comparison

SK Hynix appears significantly cheaper based on future earnings estimates, while Applied Materials trades at a premium relative to sales over the past 12 months. Forward P/E measures price against future earnings estimates, while the P/S ratio compares market value to sales over the past twelve months.

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

Which stock would I buy in 2026?

When comparing Applied Materials and SK Hynix, investors should consider a few key factors. Let's have a look at them and see what that tells us about each stock.

First, there's growth. Both companies are growing fast, but SK Hynix is a true outlier. It has averaged 50% year-over-year revenue growth over the last five years. In its most recent quarterly report, the company delivered a stunning 233% growth rate. Applied Materials, by contrast, has averaged 8% revenue growth, with its most recent report showing 25%.

Another factor to consider is each company's valuation. Here again, SK Hynix can claim an edge. On a forward price-to-earnings (P/E) basis, SK Hynix has a valuation multiple of 7x, while Applied Materials has a 41x multiple. In short, by this measure, SK Hynix is roughly 6 times cheaper than Applied Materials.

Last, there's profitability. When it comes to profitability, the comparison can get complicated. Overall, Applied Materials has delivered steady, solid profits. Its operating margin has averaged 30% over the last five years. SK Hynix, by contrast, has averaged around 21%. However, that average is dragged down by years of losses in 2023 and 2024. Since 2025, SK Hynix has maintained a higher operating margin than Applied Materials, and in recent quarters, it has soared to well over 50%.

In summary, it's appropriate for growth-oriented investors to give both of these stocks strong consideration. However, in a head-to-head matchup, SK Hynix comes out ahead due to its superior growth rate, lower forward P/E multiple, and excellent operating margin.

Jake Lerch has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Applied Materials and Intel. The Motley Fool has a disclosure policy.