Applied Materials Plunges 13.8%: What's Behind the Selloff and What's Next?

Summary
• Applied Materials (AMAT) slumps 13.8% to $162.18, its worst day since 2020
• Intraday range spans $161.71 to $167.50, reflecting sharp volatility
• CEO cites China demand slowdown and macroeconomic uncertainty as key drivers

Applied Materials’ stock has imploded amid a bearish earnings update, with CEO Gary Dickerson flagging China-related headwinds and leading-edge customer demand shifts. The selloff has outpaced even the broader semiconductor equipment sector, as investors reassess growth prospects for the $151 billion market cap leader.

Weak Guidance and China Demand Pressures Trigger Sharp Selloff
The collapse in AMAT shares stems directly from the company’s fourth-quarter revenue forecast of $6.7 billion, far below the $7.34 billion Wall Street expected. CEO Gary Dickerson explicitly tied the slowdown to China clients reducing spending after a recent manufacturing boom, while trade tensions and macroeconomic uncertainty cloud visibility. The guidance also excluded pending export licenses and assumed a significant backlog, signaling operational challenges. Despite beating Q3 earnings, the forward-looking pessimism overshadowed short-term results, triggering a flight to safety.

Semiconductor Equipment Sector Under Pressure as Lam Research Slides 7%
The semiconductor equipment sector mirrored AMAT’s weakness, with peer Lam Research (LRCX) down 7%. Both stocks face shared headwinds from China’s cyclical demand shifts and global trade tensions. However, AMAT’s selloff was more severe due to its heavier exposure to China’s manufacturing slowdown and its role as a bellwether for the industry’s capital expenditure cycle. The sector’s 52-week range (123.74–215.7) suggests volatility remains embedded as macroeconomic risks persist.

Options Playbook: High-Leverage Puts and Calls for Volatility Play
• MACD: 0.444 (bullish divergence), RSI: 53.27 (neutral), 200D MA: 170.24 (below price)
• Bollinger Bands: Price at 162.18 (below lower band 177.52), indicating oversold conditions
• Key support/resistance: 188.29 (30D), 171.80 (200D)

AMAT’s technicals suggest a short-term rebound is possible, but the 52-week low of $123.74 remains a critical downside risk. Two options stand out for volatility-driven strategies:

• AMAT20250822P155 (Put):
- Strike: $155, Expiry: 8/22, IV: 35.75%, Leverage: 182.22%, Delta: -0.185, Theta: -0.011, Gamma: 0.031, Turnover: $722k
- High leverage and moderate delta position this put to capitalize on a 5% downside move (projected payoff: $7.18).
• AMAT20250822C162.5 (Call):
- Strike: $162.5, Expiry: 8/22, IV: 31.82%, Leverage: 54.98%, Delta: 0.499, Theta: -0.518, Gamma: 0.052, Turnover: $770k
- Balanced risk/reward with high gamma for price sensitivity and decent liquidity. A 5% rebound would yield $10.18 payoff.

Aggressive bulls may consider AMAT20250822C162.5 into a bounce above $165, while bears eye AMAT20250822P155 for a breakdown below $160.

Backtest Applied Materials Stock Performance
The 3-day win rate for AMAT after an intraday plunge of -14% is 56.29%, the 10-day win rate is 58.92%, and the 30-day win rate is 62.94%. The maximum return during the backtest period was 8.46%, with a maximum return day 59 days after the plunge.

Act Now: Position for Volatility or Rebound as Sector Uncertainty Lingers
The selloff in AMAT reflects a mix of near-term demand concerns and macroeconomic jitters, but technicals hint at a potential rebound from oversold levels. With Lam Research (LRCX) down 7%, sector-wide caution persists. Investors should monitor the $160 support and $170 resistance for directional clues. For now, high-leverage options like AMAT20250822P155 and AMAT20250822C162.5 offer asymmetric payoffs in a volatile environment. Watch for $160 breakdown or regulatory reaction to China trade dynamics.