(Bloomberg) -- Applied Materials Inc., the largest US maker of chip-manufacturing equipment, suffered its worst stock decline in a month after giving a disappointing revenue forecast, a sign that some semiconductor customers may be holding off on orders.
The shares fell as much as 10% to $167.33 in New York on Friday after the company said fiscal first-quarter sales would be about $7.15 billion. Analysts had estimated $7.25 billion on average.
Massive spending on artificial intelligence computing has fueled demand for the most advanced chips — and, in turn, the machines needed to produce them. But other sectors of the industry are slowing down. Some makers of chips for industrial equipment and vehicles, for instance, have reported sluggish demand.
Applied Materials’ revenue from China also has slipped. The company had seen a surge in orders from that country in recent quarters, driven in part by demand for memory-chip equipment. The market is still healthy, Applied Materials said, and China is generating a more sustainable share of its revenue. The country accounted for 30% of sales last quarter, down from 44% a year earlier.
The intraday decline was the steepest since Oct. 15. Shares of the Santa Clara, California-based company had been up 15% this year before Friday’s drop.
Chief Executive Officer Gary Dickerson said he remains confident that AI and new types of chips will keep the industry growing.
“Applied has leadership in all the advanced segments,” he said in an interview. “AI is the big driver for the entire industry.”
Applied Materials’ main customers are some of the biggest companies in the chip industry, including Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co. and Intel Corp. Those manufacturers order gear well ahead of starting production, making Applied Materials’ forecasts a barometer for future demand.
The company’s profit outlook was stronger. Excluding some items, earnings will be roughly $2.29 a share in first quarter, which runs through January. The average projection was $2.28 a share, according to data compiled by Bloomberg.
Fourth-quarter results also exceeded estimates. Profit was $2.32 a share, excluding some items, with revenue rising 4.8% to $7.05 billion. Analysts estimated $2.19 a share in earnings and $6.97 billion in sales.
Applied Materials and other US chip companies have been navigating stricter trade restrictions. In China, chipmakers use its machines to produce less sophisticated chips — ones that aren’t subject to the trade curbs. The most advanced semiconductors, and the equipment used to make them, are barred from the country.
Applied Materials also has seen tepid demand for its ICAPS business — chip equipment for components going into internet-connected appliances, communications, autos, power control and sensors.
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