Applied Materials Slides as AI Chip Trade Loses Steam

Key Moments

Market Reassesses AI Trade, Pressuring U.S. Chip Stocks

U.S. semiconductor names came under pressure Monday as investors reconsidered their positioning in the artificial intelligence theme. The move followed comments from leading technology executives who called for slowing the pace of AI development due to growing safety concerns. Within this backdrop, Applied Materials Inc (NASDAQ:AMAT) declined 5.8% in pre-open trading to $430, adding to a pullback that began after its fiscal third-quarter 2026 earnings release in mid-August.

Record Fiscal Q3 Results Met With “Sell the News” Reaction

Applied Materials had previously reported a strong set of fiscal Q3 numbers, but the stock nonetheless experienced a pronounced “sell the news” response. That negative trend has persisted in the weeks since the report.

In fiscal Q3, the company delivered record revenue of $9.12 billion, representing a 25% increase year over year. Non-GAAP earnings per share came in at $3.50, exceeding the $3.40 consensus estimate. Management also provided upbeat forward guidance, forecasting fourth-quarter revenue of up to $10.75 billion, a level described as significantly above analyst projections.

Despite these results, investors concentrated on issues such as the pace of margin expansion and whether the current growth trajectory could be maintained. Those concerns outweighed the otherwise favorable fundamentals and contributed to continued selling pressure in the stock.

Technical Weakness and Macro Headwinds Intensify the Decline

The broader market tone in Monday’s session added to the downward pressure. Technology and growth-oriented stocks came under broad selling, with the NASDAQ Composite moving sharply lower. This environment is particularly challenging for high-beta semiconductor equipment names such as AMAT, which had already been trending lower on a technical basis since late August.

Applied Materials’ share price now stands more than 40% below its 52-week high, marking a substantial valuation reset from earlier peaks. This comes even as the company continues to benefit from demand tied to AI infrastructure spending, which supports its fundamental profile.

Near-Term Bias Lower Despite Supportive Long-Term Demand Story

The current move in AMAT reflects a combination of factors: residual pessimism after the earnings reaction, a weakening technical setup, and a generally risk-off stance across markets. Together, these elements have driven the stock sharply lower in pre-market trading.

With no fresh company-specific developments to shift sentiment or recalibrate expectations, downward pressure remains the more likely near-term direction for the shares. At the same time, the article notes that the broader long-term outlook for semiconductor equipment demand – aided by AI-related capital investment – remains intact.