Applied Materials
became the latest company to get tangled up in the dispute between the U.S. and China over semiconductors. The stock was falling Friday even after it reported quarterly earnings that beat expectations.
Just as the company (ticker: AMAT) was posting results Thursday, Reuters reported that it was under investigation for sending products to a Chinese company without the required licenses. Applied Materials makes semiconductor equipment and software and its clients include
Intel
(INTC) and
Taiwan Semiconductor Manufacturing
(TSM).
Applied Materials stock dropped 7.1% in premarket trading Friday to $143.79. The company didn’t immediately respond to a request for comment from Barron’s.
Following the earnings report, analysts at KeyBanc led by Steve Barger modestly raised their fiscal 2024 earnings estimates for Applied Materials. They have a Sector Weight rating on the stock.
Others were more pessimistic. Analysts at Susquehanna International Group led by Mehdi Hosseini see a risk that earnings could be 10% lower than expected because demand in China probably won’t stay strong.
Semiconductor Advisers wrote in a note that Applied Materials may face hundreds of millions of dollars in fines if it is found to have violated export rules, as well as restrictions on future sales in China.
“It’s very, very bad when you take into consideration that China is Applied’s largest customer and Applied has a huge operation in China,” the consulting services firm wrote.
Chinese tech company
Alibaba
(BABA) on Thursday said it was halting plans to spin off its cloud computing unit because of concerns about U.S.-China relations. The two countries have been slapping tit-for-tat restrictions on exports, with the U.S. in particular targeting the most advanced chips on worries they could potentially be used for military purposes.
Chinese Premier Xi Jinping met with President Joe Biden in the U.S. this week. He said that the U.S. and China should be friends, not adversaries.
Write to Brian Swint at brian.swint@barrons.com
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