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Applied Materials Warns of $600 Million Revenue Hit in 2026 After Expanded U.S. Chip Export Curbs

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Applied Materials, one of the world’s largest semiconductor equipment makers, said it expects a $600 million revenue impact in fiscal 2026 after the U.S. government broadened export restrictions on technology shipments to China and its affiliates.

The company’s shares fell about 3% in after-hours trading on Thursday following a regulatory filing that detailed the potential hit. Applied Materials said the new rules will make it harder to export certain products and provide parts or services to specific China-based subsidiaries without a U.S. export license.

New U.S. Restrictions Target Loopholes

The U.S. Department of Commerce this week expanded its export blacklist to include majority-owned subsidiaries of already restricted companies. The move targets entities that have been using offshore affiliates to circumvent U.S. export controls on sensitive technologies, particularly in the semiconductor, aerospace, and medical equipment sectors.

The company estimated an additional $110 million impact on its fourth-quarter 2024 revenue, compounding challenges already caused by a slowdown in China and ongoing tariff pressures.

Broader Industry Pressure

Applied Materials, along with European chipmaking equipment supplier ASML Holding, has been hit by weak demand in China, where export curbs have limited access to advanced lithography and chip-manufacturing tools.

Analysts said the new rule could disrupt global semiconductor supply chains and increase the number of firms that will now need licenses to receive U.S.-origin components and services.

Washington’s Push for Domestic Chip Production

In a related policy move, U.S. Commerce Secretary Howard Lutnick said Washington was urging Taiwan to adopt a 50-50 manufacturing split with the United States, part of efforts to boost domestic chip production and reduce dependence on overseas supply chains.

Applied Materials’ Financial Outlook

Despite the looming headwinds, Applied Materials reported strong results for fiscal 2024, with revenue up 2.5% year-over-year to $27.18 billion. Third-quarter revenue rose 8% to $7.30 billion, surpassing market expectations of $7.22 billion, according to LSEG data.

However, the company’s August outlook had already signaled a cautious tone, citing “geopolitical uncertainty and weaker equipment spending” as persistent risks heading into 2025.

As the U.S.–China technology rivalry intensifies, Applied Materials’ latest warning highlights the growing cost of Washington’s export-control campaign, which is reshaping the global semiconductor landscape and testing the resilience of supply chains worldwide.

Alibaba and Baidu Turn to In-House Chips for AI Training Amid U.S. Restrictions

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Alibaba and Baidu have begun using their own internally designed chips to train AI models, partly replacing Nvidia’s processors, according to a report from The Information. The move signals a major shift in China’s AI development strategy, as U.S. export controls continue to restrict access to advanced American-made semiconductors.

Key Developments

  • Alibaba has used its homegrown chips since early 2025 to train smaller AI models.

  • Baidu is testing its Kunlun P800 chip to train new versions of its Ernie AI model.

  • Both companies still rely on Nvidia for their most advanced models but are working to reduce dependence.

Impact on Nvidia

Nvidia remains dominant in AI training hardware, but China accounts for a large share of its business. The firm’s most powerful U.S.-approved chip for China, the H20, lags behind the H100 and Blackwell series — but still outperforms most Chinese alternatives.

However, employees cited by The Information said Alibaba’s latest AI chip matches the performance of Nvidia’s H20, narrowing the gap between U.S. and Chinese hardware.

An Nvidia spokesperson responded: “The competition has undeniably arrived … We’ll continue to work to earn the trust and support of mainstream developers everywhere.”

Geopolitical Pressure

  • U.S. export restrictions have pushed Chinese companies to accelerate domestic chip design.

  • Beijing has urged firms to rely on home-grown semiconductor technology as part of its strategic autonomy push.

  • Nvidia CEO Jensen Huang recently said talks with the White House over permission to sell a less advanced next-gen chip to China will take time.

According to the report, Nvidia has agreed to give the Trump administration 15% of China sales of its H20 chips in exchange for continued export licenses.

The Bigger Picture

China’s pivot toward domestic AI chips marks both a risk to Nvidia’s China revenues and a milestone for Chinese chipmakers, who are beginning to close the performance gap under intense geopolitical and economic pressure.

China’s CXMT Corp Begins IPO Preparation Amid Push to Expand DRAM Chip Business

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CXMT Corporation, the parent company of Chinese DRAM chipmaker ChangXin Memory Technologies, has started the initial preparations for an initial public offering (IPO), according to a document released by China’s securities regulator.

Summary:

  • IPO Preparation:
    CXMT has entered the “counselling process” for an IPO, having hired state-owned investment banks China International Capital Corporation and CSC Financial to assist. However, details on the timing or location of the IPO remain undisclosed.

  • Company Profile:
    CXMT is a major player in China’s drive to develop a domestic dynamic random-access memory (DRAM) chip industry, a sector historically dominated by firms from the U.S., Japan, and South Korea. Founded in 2016 with state backing, CXMT oversees subsidiaries including ChangXin Memory Technologies.

  • Production Facilities:
    The company operates two semiconductor foundries in China—one in Hefei, Anhui Province, and a newer facility in Beijing, with production ramping up since September 2023. Monthly production capacity is estimated at around 200,000 12-inch wafers.

  • Regulatory Challenges:
    CXMT narrowly avoided being added to the U.S. Entity List in May but remains subject to U.S. export restrictions from October 2022, which limit China’s ability to manufacture advanced DRAM chips.

  • No Further Details:
    The document did not specify which assets will be part of the IPO or whether the CXMT subsidiary itself will be listed. The company did not immediately respond to requests for comment.