Applied Materials, Inc.

(NASDAQ Global Select)
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Slightly Bullish +25

Semiconductor Equipment Stocks Slide as Investors Take Profits on a Huge Year: Applied Materials Sinks 7%, Lam Research and KLA Drop 4% - 24/7 Wall St.

Company update AI-generated analysis

📉 Applied Materials shares sank 7% in afternoon trading as investors took profits following an 80% year-to-date gain.

🏭 The company unveiled its EPIC Center, a $5 billion facility for collaborative semiconductor process research at its Sunnyvale campus.

💰 Q3 FY2026 adjusted EPS reached $3.50, beating the $3.39 analyst estimate and supporting the longer-term growth story.

📅 Management guided Q4 FY2026 revenue to approximately $10.25 billion based on increased demand visibility.

🇨🇳 China represents 28% of Applied Materials' revenue, keeping policy risk on the table despite a reduction from 35% previously.

🤝 A leading chipmaker joined the EPIC Center as a founding partner, giving the project a strong start immediately.

📊 The equipment selloff dwarfs the broader chip market, with SOXX down just 1% and QQQ off only 0.5%.

🔮 CEO expects another strong growth year for Applied Materials in 2027 based on current customer demand.

⚠️ Equipment orders are discretionary, meaning a stock with such large gains has room to fall if spending is questioned.

📈 Peer companies Lam Research and KLA also declined 4%, indicating sector-wide profit-taking rather than isolated weakness.

Bullish Signals
  • Applied Materials reported Q3 FY2026 adjusted EPS of $3.50, beating the consensus estimate of $3.39.
  • The company guided Q4 FY2026 revenue to approximately $10.25 billion, indicating strong near-term visibility.
  • Management expects another strong growth year in 2027 based on increased demand visibility from customers.
  • The EPIC Center represents a major strategic investment of approximately $5 billion to support advanced-node and packaging work required for AI buildouts.
  • A leading chipmaker joined the EPIC Center as a founding partner, validating the facility's immediate relevance.
Risk Factors
  • Applied Materials sank 7% as investors locked in profits after an 80% year-to-date gain, signaling potential profit-taking pressure.
  • China still represents 28% of revenue, maintaining significant policy risk exposure despite a reduction from 35% previously.
  • The equipment selloff is significantly sharper than the broader semiconductor sector, pointing to specific fabrication-budget fears.
  • Equipment orders are discretionary, meaning the stock could face further declines if customer spending plans shift or slow down.
Full Analysis
Semiconductor equipment stocks faced significant profit-taking pressure as investors locked in substantial year-to-date gains, with Applied Materials (AMAT) sinking 7% while peers Lam Research and KLA dropped 4%. This selloff was more severe than the broader semiconductor sector, which saw minimal declines, highlighting specific concerns regarding fabrication budgets rather than a general market pullback. Despite the daily drop, AMAT remains up approximately 80% for the year. Applied Materials recently unveiled its EPIC Center in Sunnyvale, a massive $5 billion collaborative research facility designed to support advanced-node and packaging work critical for AI buildouts. The company reported strong Q3 FY2026 results with adjusted EPS of $3.50, beating estimates, and provided guidance for Q4 revenue around $10.25 billion. Management maintains a positive outlook, expecting another strong growth year in 2027 based on increased demand visibility from customers. Geopolitical and policy risks remain a key factor influencing AMAT's stock performance, as China still accounts for 28% of its revenue, down from 35% previously but representing a significant portion of the business. While U.S. customers now make up 15% of revenue, the discretionary nature of equipment orders means that any questioning of spending plans could lead to further volatility. Investors are advised to monitor the progress of projects at the EPIC Center and the widening or narrowing gap between equipment stocks and the broader semiconductor ETF.