Applied Materials reports earnings next Thursday , and investors are still aggressively chasing the artificial intelligence trade after a brief pullback in big tech valuations. However, the edge potentially lies in owning the companies that manufacture the picks and shovels. Despite AMAT being up more than 100% in 2026, I remain bullish on the world's largest supplier of wafer fab equipment. Based on the current options chain for the Aug. 14 weekly expiration — the day after AMAT's quarterly report — the market is pricing in an expected earnings move of about 14%, or a $75 move for those who speak in dollars. AMAT is about 26% off of its all-time high of $739.67. AMAT YTD mountain Applied Materials in 2026 On Thursday, Elon Musk and SpaceX confirmed a massive $16.8 billion initial investment to build Terafab, a chip plant, in Texas. Musk is seeking to produce a staggering one terawatt of AI computing power. Yet, he cannot build a single custom chip without the essential manufacturing machinery required to produce it and that is why I believe AMAT is perfectly positioned right now. Musk's Terafab announcement is a massive validation of the ongoing, structural equipment crunch. If Terafab accomplishes consolidation of logic fabrication, memory production and advanced packaging under one roof at an unprecedented scale, it will have to spend billions of dollars on wafer fab equipment. Applied Materials is one of the only companies on Earth capable of fulfilling that type of demand, making this a highly visible, multi-year revenue catalyst. Whether it is Taiwan Semiconductor Manufacturing expanding, Intel building out its foundry business , or a brand-new entrant like Terafab breaking ground, capital expenditures in the semiconductor space have to flow through Applied Materials, the ultimate AI tollbooth. Applied Materials is the dominant supplier of the etchers, depositors and testing tools required to manufacture modern silicon. The company doesn't have to win the AI chip design race; it just collects a toll from whoever does. Government subsidies should provide additional tailwinds as we are still in the early innings of a massive global push to onshore semiconductor manufacturing. Armed with CHIPS Act funding in the U.S. and similar subsidies in Europe and Japan, the world's largest foundries are spending government money to buy AMAT's equipment. It is a powerful secular tailwind that provides a firm floor under the company's forward guidance. Bullish risk reversal implied volatility is highly elevated, but so is AMAT's year-to-date performance, thus reducing cost is imperative in this trade. Buying naked upside calls right now means paying a massive premium, but selling an out-of-the-money put will assist in mitigating the overall cost of this debit spread. Note that this is a very close expiration date, as I am just looking to play the earnings report reaction. Bought the 8/14/2026 $555 call for $20.00 Sold the 8/14/2026 $475 put for $7.50 AMAT was bouncing around $535 when this trade was executed. DISCLOSURES: Kilburg executed this risk reversal and currently holds a position in AMAT in his ETF Mango Growth ETF (GARY) that he co-manages. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.