KLA's 8% Freefall: Applied Materials' China Warning Ignites Sector Turmoil

Summary
• KLA (KLAC) plunges 8.19% to $877.20, its worst intraday drop since 2020
• Applied Materials (AMAT) issues Q4 profit warning, citing China demand collapse
• KLA's China exposure (33% of sales) amplifies sector-wide jitters

The semiconductor equipment sector is reeling as KLA Corporation (KLAC) tumbles 8.19% in a single trading session, driven by Applied Materials' (AMAT) dire Q4 guidance. With China's semiconductor demand slowdown at the epicenter of the selloff, investors are recalibrating expectations for capital-intensive equipment makers. The stock's 873.16 intraday low underscores the fragility of valuations in a sector once deemed recession-resistant.

China's Semiconductor Demand Woes Trigger KLA's Sharp Decline
Applied Materials' (AMAT) 13.8% intraday freefall catalyzed KLA's 8.19% drop as both firms face identical headwinds: China's 37% revenue exposure for AMAT and 33% for KLA. The Asian giant is 'digesting' its existing equipment inventory, per AMAT's CEO, while Trump's looming 100% semiconductor tariff threat compounds uncertainty. With KLA trading at 31x forward earnings—well above its 52-week low of 551.33—the market is pricing in a near-term revenue contraction for the wafer inspection leader.

Semiconductor Equipment Sector in Synchronized Decline
The sector's pain is widespread: Lam Research (LRCX) falls 6.87%, Teradyne (TER) drops 1.52%, and ASML (ASML) slips 1.43%. KLA's 8.19% decline aligns with the sector's risk-off sentiment, though its China exposure makes it more vulnerable than ASML's diversified model. The S&P 500's 0.19% decline suggests this is a sector-specific selloff rather than a broad market correction.

Bearish Technical Setup: Short-Term Volatility Playbook
• 200-day MA: 745.74 (well below current price)
• RSI: 61.44 (neutral but declining)
• Bollinger Bands: Price at 877.20 (near lower band at 869.26)
• MACD: 11.16 (bullish divergence fading)

The technical picture suggests a bearish reversal is imminent. Key support at 921.80 (30D support) and 697.77 (200D support) could trigger a cascade if breached. While no options data is available, leveraged ETFs (if available) could offer amplified exposure to the sector's near-term weakness. A 5% downside scenario (to $833.34) would test critical psychological levels, potentially accelerating the selloff.

Backtest KLA Stock Performance
The backtest of KLAC's performance after an intraday plunge of -8% shows favorable short-to-medium-term gains. The 3-Day win rate is 57.75%, the 10-Day win rate is 60.96%, and the 30-Day win rate is 64.35%. Although the maximum return during the backtest period is only 10.28% over 30 days, the overall trend suggests that KLAC tends to recover and even exceed its pre-plunge levels in the following days.

KLA's 8% Drop: A Bearish Signal Amid Sector Uncertainty
The 8.19% intraday collapse signals a material shift in sentiment for capital-intensive semiconductor equipment firms. With China's demand slowdown and Trump's tariff threats creating a perfect storm, KLA's 31x forward P/E premium is unsustainable in the near term. Investors should monitor the 869.26 Bollinger Band support level and sector leader Lam Research (LRCX, -6.87%) for confirmation of a broader selloff. A breakdown below 869.26 would validate a bearish technical setup, warranting defensive positioning in the sector.