What Happened?

Shares of semiconductor machinery manufacturer Applied Materials (NASDAQ: AMAT) fell 3.8% in the morning session after a warning from European peer ASML (ASML) about potential growth uncertainty in 2026 due to U.S. tariff policies. 

The news from ASML, a key supplier to the semiconductor industry, sparked concerns across the sector, leading to a sell-off in related stocks. Applied Materials, along with other U.S. semiconductor equipment makers like Lam Research and KLA Corp, saw jejich shares decline in pre-market trading. The cautious sentiment reflects investor anxiety over how ongoing trade tensions and tariff policies could impact the global supply chain and future corporate earnings for companies that are heavily reliant on international markets. This macro-level uncertainty appeared to overshadow company-specific fundamentals for the day.

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What Is The Market Telling Us

Applied Materials’s shares are very volatile and have had 23 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 8 months ago when the stock dropped 9.2% on the news that the company reported weak third-quarter (Fiscal Q4 2024) results. 

Its revenue guidance for the next quarter slightly missed. Sales growth was also underwhelming during the quarter as revenue beat by a narrow margin. The company attributed some of the weakness to headwinds which impacted sales in China. 

Although key operating segments exceeded analysts' estimates by small margins, underlying weaknesses became more apparent when data was aggregated by product categories. Specifically, DRAM sales fell below Wall Street's estimates, declining by 10% year-on-year, given tough comparisons amid elevated purchases from China in the previous year. 

Zooming out, we think this is a challenging quarter for the company. Following the results, Morgan Stanley analyst Joseph Moore lowered his price target from $185 to $179, calling out uncertainty around export controls. Moore added, "Consistent with our outlook that 2025 may not be as good as one expected 6 months ago, expectations for foundry orders from Intel and Samsung have receded, ICAPS ex-China appears to be going through a prolonged correction, and NAND has yet to recover from a very low base."

Applied Materials is up 16.4% since the beginning of the year, but at $190.67 per share, it is still trading 22.4% below its 52-week high of $245.84 from July 2024. Investors who bought $1,000 worth of Applied Materials’s shares 5 years ago would now be looking at an investment worth $3,059.

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