Applied Materials (AMAT.O) shares fell roughly 12% in Friday morning trading after the chip-equipment maker issued a disappointing revenue and profit forecast, raising investor concerns about the impact of U.S.-China trade tensions on demand. The decline follows warnings from Dutch rival ASML (ASML.AS), highlighting continued uncertainty over the effects of U.S. tariffs on the semiconductor industry.
CEO Gary Dickerson cited “wide-ranging implications for the semiconductor industry” during a post-earnings call, pointing to lower visibility and heightened uncertainty in the near term due to dynamic policy developments. China, which represented 35% of Applied Materials’ July-quarter sales, has become a key risk as U.S. export restrictions weigh on new equipment orders.
Smaller peer KLA Corp (KLAC.O), which also has a strong presence in China, expects softer demand amid ongoing Sino-U.S. trade tensions, while Deutsche Bank strategists warned that volatility in China is clouding visibility into earnings potential both geopolitically and cyclically.
Applied Materials forecast fourth-quarter revenue of $6.70 billion, plus or minus $500 million, below analysts’ consensus of $7.33 billion. Its projected profit also fell short of expectations. If losses persist, the company could shed over $18 billion from its $151.06 billion market value as of Thursday’s close.
J.P. Morgan analyst Harlan Sur suggested that the slowdown in China reflects timing of spending rather than structural weaknesses. Applied’s stock has risen 1.2% year-to-date, trailing the Nasdaq (.IXIC) up 12.3% and the S&P 500 (.SPX) up 10%.
Shares of other chip-equipment makers, including KLA Corp and Lam Research (LRCX.O), also fell following Applied’s results, down 5.5% and 4.3%, respectively. Applied reported third-quarter revenue of $7.30 billion, up 8% year-on-year and above the $7.22 billion consensus. Its stock trades at a forward price-to-earnings ratio of 19, lower than ASML’s 26.04, Lam’s 23.56, and KLA’s 26.82.