China is pulling back on purchases of semiconductor manufacturing equipment -- and KLA sells nearly as much stuff to China as Applied does. An earnings warning from Applied Materials just spooked KLA stock investors.

Applied Materials Inc. suffered the worst single-day stock decline in five years after giving a disappointing sales and profit forecast, renewing concerns that the US trade dispute with China is weighing on demand.

Analysts wonder if China’s recent “overspending” on chip equipment is coming to a halt — and if the company is losing market share to rivals.

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Applied Materials is likely to continue seeing a higher proportion of advanced equipment, fueled by applications like generative AI and the transition

The lower guidance prompted a rapid sell-off of Applied Material’s shares, and its stock fell more than 13% in extended trading. Following that decline, the company’s stock is now up just 15% in the year to date, slightly ahead of the S&P 500 Index, which has gained just over 10% so far this year.

Applied Materials stock dropped after it forecast a range of revenue for the current quarter well below Wall Street’s consensus estimate.

Shares of Applied Materials Inc (NASDAQ: AMAT) tanked despite upbeat fiscal Q3 results. BofA downgraded, Goldman Sachs reiterated buy, Needham kept buy.