Applied Materials Plunges 2.28%: What's Fueling the Selloff Amid Record Earnings and Institutional Exodus?

Summary
• AMAT’s intraday price drops 2.28% to $268.885, breaching key support levels.
• Institutional investors like Intact and NewEdge Advisors sold 12.7% and 57.7% of holdings, respectively.
• Earnings beat expectations with $2.17 EPS but revenue fell 3.5% year-over-year.

Applied Materials (AMAT) faces a sharp intraday selloff despite strong quarterly earnings, driven by institutional divestments and sector-wide concerns over thermal management challenges in advanced chip designs. The stock trades near its 52-week low of $123.74, with insiders and major funds trimming positions amid regulatory and geopolitical uncertainties.

Thermal Management Challenges and Geopolitical Shifts Trigger AMAT Selloff
The selloff in AMAT is part of a broader semiconductor equipment sector correction, triggered by emerging thermal management complexities in multidie chip designs and shifting geopolitical dynamics. Recent sector news highlights Germany redirecting Intel funds to new semiconductor projects and Europe’s push for sovereignty in chip manufacturing, creating uncertainty for global supply chains. AMAT’s exposure to AI-driven semiconductor demand, while historically bullish, now faces near-term headwinds as investors reassess valuations amid rising production costs and regulatory scrutiny.

Semiconductor Equipment Sector Weakness: LRCX Trails AMAT's 3.45% Drop
Lam Research (LRCX), a key peer in the semiconductor equipment sector, has fallen 0.61% intraday, outpacing AMAT’s 2.28% decline. Both stocks are reacting to sector-wide concerns over AI infrastructure costs and supply chain bottlenecks. AMAT’s 30-day moving average of $242.0965 remains a critical support level, while LRCX’s weaker performance suggests broader sector fragility. The sector’s high beta (AMAT: 1.67) amplifies its sensitivity to macroeconomic shifts.

High-Leverage Options Highlight Market Uncertainty: AMAT20251219P250 and AMAT20251219C260 Stand Out
• 200-day average: $184.098 (well below current price)
• RSI: 76.77 (overbought territory)
• MACD: 12.24 (bullish divergence)
• Bollinger Bands: $207.26–$285.28 (current price near lower band)

Technical indicators suggest AMAT is in a short-term bearish phase despite a long-term bullish trend. Key levels to watch include the 30-day support at $230.12 and the 200-day average at $184.10. The stock’s high beta and elevated RSI position it for potential volatility, making leveraged options attractive for short-term plays.

Top Option 1: AMAT20251219P250
• Contract Code: AMAT20251219P250
• Type: Put
• Strike Price: $250
• Expiration: 2025-12-19
• IV: 42.31% (moderate)
• Leverage Ratio: 127.84% (high)
• Delta: -0.2033 (moderate sensitivity)
• Theta: -0.0585 (moderate time decay)
• Gamma: 0.01616 (high sensitivity to price movement)
• Turnover: 15,465 (high liquidity)

This put option offers high leverage and gamma, ideal for capitalizing on a potential 5% downside move. A 5% drop to $253.69 would yield a payoff of $3.69 per contract, translating to a 29.3% return on the $12.59 premium.

Top Option 2: AMAT20251219C260
• Contract Code: AMAT20251219C260
• Type: Call
• Strike Price: $260
• Expiration: 2025-12-19
• IV: 55.54% (moderate)
• Leverage Ratio: 23.94% (moderate)
• Delta: 0.5794 (moderate sensitivity)
• Theta: -1.038 (high time decay)
• Gamma: 0.01702 (high sensitivity)
• Turnover: 44,780 (very high liquidity)

This call option balances leverage and liquidity, suitable for a bullish rebound scenario. A 5% rebound to $280.39 would generate a $20.39 payoff, a 44.5% return on the $45.50 premium.

Aggressive bulls may consider AMAT20251219C260 into a bounce above $260, while bears should monitor the 200-day average for a potential breakdown.

Backtest Applied Materials Stock Performance
The backtest of AMAT's performance after an intraday plunge of at least -2% from 2022 to the present shows favorable short-to-medium-term gains. The 3-Day win rate is 55.19%, the 10-Day win rate is 56.02%, and the 30-Day win rate is 59.75%, indicating a higher probability of positive returns in the immediate aftermath of the plunge. The maximum return during the backtest was 7.08%, which occurred on day 59, suggesting that there is potential for substantial gains following the intraday downturn.

AMAT at Crossroads: Watch for $230 Breakdown or Regulatory Shift
AMAT’s selloff reflects broader semiconductor sector fragility, driven by thermal management challenges and geopolitical shifts. While technical indicators suggest a potential rebound near the 30-day support at $230.12, the stock’s high beta and overbought RSI signal caution. Investors should monitor LRCX’s 0.61% decline as a sector barometer. For those with a short-term outlook, leveraged options like AMAT20251219P250 and AMAT20251219C260 offer high-reward scenarios. Watch for a breakdown below $230 or a regulatory shift in semiconductor policy.