Applied Materials (AMAT 0.57%) is solving a key problem that the world is facing right now -- the semiconductor shortage. Despite how the shortage is boosting the company's growth, its stock doesn't reflect that and has turned in an underwhelming performance on the market so far in 2022.

Known for supplying manufacturing equipment, services, and software to chipmakers and foundries, Applied Materials delivered outstanding results in February that trumped Wall Street estimates. Investors, however, seem concerned about the company's near-term prospects, as its guidance wasn't as strong as expected.

But have investors done the right thing by dumping Applied Materials stock in 2022 even though the company looks set for long-term growth? Or will Applied Materials bulls have the last laugh? Let's see if we can answer these questions.

Man in specs looking at a line chart on a laptop.

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The bearish case for Applied Materials

Applied Materials' fiscal 2022 first-quarter results for the three months ending on Jan. 30, 2022, were quite solid. The company's revenue was up 21% year over year to a quarterly record of $6.27 billion, and adjusted earnings increased 36% over the prior year to $1.89 per share. The guidance, however, hinted at a slowdown in the company's growth.

Applied Materials guided for $1.90 per share in earnings on $6.35 billion in revenue for the fiscal second quarter at the midpoint of its range. The company delivered $1.63 per share in earnings in the prior-year period on revenue of $5.58 billion. The guidance suggests that Applied Materials' revenue growth could slow down to just 14% this quarter, while earnings would increase 16% compared to the prior-year period.

Analysts are also taking a dim view of Applied Materials' prospects, expecting just 15% revenue growth from the company this fiscal year followed by a 10% increase in the next one. That points toward a major slowdown over the terrific growth Applied Materials has clocked in recent years. The company's annual revenue increased 34% in fiscal 2021 (which ended on Oct. 31, 2021) and 25% in fiscal 2020, and investors would have expected another robust year given the booming demand for semiconductor manufacturing equipment.

Ironically, the reason why Applied Materials is losing momentum is because of the very problem that the company is trying to solve. CEO Gary Dickerson said on the company's February earnings conference call that "the biggest challenge we face today is the availability of certain silicon components that go into subsystems within our products."

So supply chain constraints and the lack of components required to finish the machines and deliver them to customers could weigh on Applied Materials in the near term. However, the bull case for the stock appears to be stronger than the bear case.

The bullish case

Applied Materials may be in a tough spot right now due to supply-related constraints, but demand for the company's products remains solid. That's evident from the $1.3 billion increase in the company's backlog in the fiscal first quarter. Applied Materials' overall backlog sits at $8 billion, and management expects to carry forward a sizable backlog into the next year as well.

Another reason to be positive about Applied Materials is that the company is taking steps to shore up its supply chain with the help of its supplier partners. Management expects gradual supply chain improvements as the year progresses, leading to growth in revenue and earnings throughout 2022 and 2023.

Savvy investors should also notice that the demand for semiconductor manufacturing equipment is expected to remain high over the long run. According to Applied Materials, the wafer fabrication equipment market is expected to grow over 15% in 2022 to a size of $100 billion, and the high levels of spending seem sustainable given the booming demand for chips.

The semiconductor industry is expected to add $400 billion in revenue from 2024 to 2030. This points toward a massive acceleration in semiconductor consumption, as it has taken almost 24 years for the industry to add the last $400 billion in revenue. This huge jump in semiconductor consumption in the coming years would drive the need for more investments in manufacturing equipment and other services, paving the way for long-term growth at Applied Materials.

As such, investors looking to buy a top semiconductor play for the long run should look past the near-term challenges that Applied Materials is facing. What's more, the stock is trading at just 15 times trailing earnings following its sharp pullback in 2022 -- a nice discount to the S&P 500's multiple of 25 -- giving investors a great opportunity to buy this company that seems built for long-term growth.