Applied Materials Shares Slump as China's 50% Local Equipment Mandate Sparks Fears Stock Ranks 54th in 780M Trading Surge

Market Snapshot

On December 30, 2025, , marking the end of a seven-day winning streak. , , placing the stock 54th in terms of market activity. The decline lagged a largely flat semiconductor ETF and occurred amid holiday-thin trading conditions. The stock’s performance followed reports of China mandating chipmakers to source at least 50% of new-fab equipment domestically, raising concerns about foreign supplier demand.

Key Drivers

China’s 50% Local Equipment Mandate

The primary catalyst for AMAT’s decline was a report revealing that Chinese authorities are requiring chipmakers to allocate at least 50% of new-fab equipment spending to domestic suppliers through procurement tenders. While the policy is not publicly documented, it has been enforced since 2023, with authorities signaling a long-term goal of 100% domestic tool usage. Applied Materials, , . The company also anticipates further declines in 2026 as U.S. export controls tighten, compounding the impact of the local-content rule.

Competitive Pressures and Market Flexibility

The policy disproportionately affects mature-node production lines, where Chinese suppliers like and Advanced Micro-Fabrication Equipment () are gaining traction. Reuters noted that Naura has successfully deployed etching tools on 14nm processes and is testing 7nm tools, areas where foreign firms like Lam Research and Tokyo Electron previously dominated. While advanced-node fabs receive temporary exemptions due to gaps in local tool availability, the mandate still intensifies pricing pressure and slows procurement decisions for foreign suppliers. Applied Materials, which sells equipment for wafer deposition, etching, and inspection, faces heightened competition as Chinese firms advance in critical processes.

Analyst Optimism Amid Short-Term Headwinds

Despite the near-term challenges, , maintaining an Overweight rating. The firm cited Applied’s valuation discount to peers and its positioning for 2026 “” (wafer fab equipment) outperformance. Analysts highlighted the company’s exposure to AI-driven logic and memory spending, which could offset China-related headwinds. However, the stock remains sensitive to policy shifts, with traders closely monitoring Beijing for clarification on how the 50% threshold will evolve.

Broader Market and Sector Context

The broader market saw limited liquidity due to holiday trading, . , respectively, reflecting sector-wide pressure. The iShares Semiconductor ETF (SOXX) remained flat, underscoring mixed sentiment. Investors are parsing Federal Reserve minutes ahead of the January policy meeting, with rate expectations playing a key role in valuations for cyclical sectors like chip equipment.

Forward Outlook and Earnings Catalysts

Applied Materials’ next earnings report, scheduled for February 12, 2026, will be a critical test of management’s ability to address China demand and export-license challenges. Analysts expect the company to provide updated guidance on 2026 spending trends, particularly in advanced packaging and high-bandwidth memory segments. While the 52-week high of $276.10 remains a key technical level, the stock’s near-term trajectory will depend on whether optimism around AI-driven capex can outweigh ongoing geopolitical risks.

The confluence of China policy shifts, U.S. export controls, and sector-specific dynamics has created a volatile environment for chip equipment stocks. For Applied Materials, the coming months will test its resilience in a market increasingly shaped by geopolitical forces and rapid technological shifts in the global semiconductor supply chain.