Semiconductor Equipment Stocks Slide as Investors Take Profits on a Huge Year: Applied Materials Sinks 7%, Lam Research and KLA Drop 4%

Semiconductor equipment stocks are giving back ground after a strong year powered by artificial intelligence (AI) spending. Applied Materials (NASDAQ:AMAT | AMAT Price Prediction) stock is at $461.91, down 7% in afternoon trading, a pullback that still leaves it up 80% year to date. Selling is greatest among the companies that build chipmaking tools, a narrow corner of the chip trade.

Meanwhile, Lam Research (NASDAQ:LRCX) stock is trading at $297.04, down 4%, a smaller decline than the one hitting Applied Materials stock. Likewise, KLA (NASDAQ:KLAC) shares are slipping 4% to $182.44, keeping pace with Lam Research stock.

Chip stocks as a group are holding up far better. The iShares Semiconductor ETF (NASDAQ:SOXX) is down 1%. Over in large-cap tech, the Invesco QQQ Trust (NASDAQ:QQQ) is down 0.5%, a much softer reading than anything in the equipment group.

Applied Materials Gives Back Gains After EPIC Center Debut

Applied Materials stock is giving back part of a large advance, with the decline running alongside its equipment peers. One session earlier, the company unveiled its Equipment and Process Innovation and Commercialization Center, known as the EPIC Center, at its Sunnyvale campus. Management describes the site as the world’s largest facility for collaborative semiconductor process and equipment research. Applied Materials expects capital spending there to scale to approximately $5 billion as customer projects begin.

A leading chipmaker joined the center as a founding partner, giving the project a strong start. Recent results also support the longer-term story. In August, Applied Materials reported Q3 FY2026 adjusted EPS of $3.50 against a $3.39 estimate and guided Q4 FY2026 revenue to about $10.25 billion.

Equipment Makers Slide Harder Than the Broader Chip Group

All three equipment names carry large gains into the pullback, with Lam Research stock up 74% year to date and KLA stock up 51%. Each is falling several times harder than the semiconductor fund that holds them, a split that points at fabrication spending intentions, because the iShares fund also owns chip designers and foundries and its decline serves as broad sector context.

The EPIC Center commits capital to exactly the advanced-node and packaging work that AI buildouts require, and it ties major customers to Applied Materials earlier in the design cycle. In Q3 FY2026, U.S. customers accounted for 15% of Applied Materials’ revenue, while China fell to 28% from 35%. Looking further out, Applied Materials’ chief executive stated in the August results release, “Based on the increased demand visibility we are receiving from our customers, we expect another strong growth year for Applied Materials in 2027.”

Yet, equipment orders are discretionary, and a stock carrying a year-to-date gain of that size has a long way to fall whenever that spending is questioned. Policy adds another layer of risk, since China still made up a large share of Applied Materials’ revenue last quarter. Even after the pullback, Applied Materials shares hold most of their gain for the year, which leaves room for further profit-taking if spending plans shift.

What to Watch Next

Investors should track whether customer projects at the EPIC Center begin on schedule, since that work supports the bull case. A widening gap between the equipment trio and the iShares fund could signal deeper worries about fabrication budgets, while a narrowing gap could suggest the selling is fading.

Trading in Lam Research stock and KLA stock offers a useful cross-check, since both companies sell into the same fabrication budgets. Investors should keep their positions sized to that kind of volatility.

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