Applied Materials (NASDAQ: AMAT) shares fell in pre-market trading Friday after reports surfaced that the U.S. Department of Justice is investigating the chip equipment manufacturer for allegedly violating export restrictions on high-tech components to Chinese customers.
The DoJ is probing the group over sales it made to China-based chipmaker SMIC through a subsidiary in South Korea, as reported by Reuters on Thursday.
The U.S. recently expanded export restrictions to limit China’s access to “advanced semiconductors that could fuel breakthroughs in artificial intelligence and sophisticated computers critical to (Chinese) military applications,” stated U.S. Trade Secretary Gina Raimondo.
Applied Materials acknowledged receiving a subpoena from the U.S. Attorney’s Office requesting information regarding specific shipments to China.
This development overshadowed the company’s otherwise robust fourth-quarter earnings, where its bottom line rose 29% to $2.12 per share, outperforming Street forecasts. Revenues remained flat at $6.72 billion.
The chip equipment manufacturer also forecasts sales of around $6.5 billion for the current quarter, with expected earnings of $1.90 per share.
CEO Gary Dickerson addressed the situation on a late Thursday conference call with investors, stating,
“The October 2023 export control rule changes in the U.S. were primarily focused on alignment with other countries. The rules are complex, and while we are working with the government to clarify certain details, we see no incremental material impact to Applied at this time.”
He added,
“As I look ahead, I strongly believe that Applied Materials has the right capabilities, strategy, and partnerships.”
The market has reacted strongly to the news, with Applied Materials (NASDAQ: AMAT) shares plummeting by 7.50% in pre-market trading, indicating a Friday opening bell price of $143.20 each.
Kevin Putnam is a financial journalist and editor based in New York. He specializes in editing news and analysis related to U.S. stock market.
