Applied Materials in sharp pullback, shares face valuation test after sector selloff

By Thomas Klein, Operations & Strategy desk. Reviewed prior to publication on 2026-06-24, 08:42.

Applied Materials (US0382221051) closed the latest Nasdaq session at 585.88 US dollars, down 8.48 percent from the prior day in a broad technology and semiconductor selloff according to Zacks Investment Research and exchange data. The retreat follows a strong multi-week rally and comes as analysts reassess equipment spending and valuations for AI-driven chip stocks, including peers such as Lam Research.

What market reports highlight

Zacks reports that Applied Materials shares ended the session at 585.88 dollars, underperforming the S&P 500’s 1.44 percent decline, the Dow’s 0.09 percent loss and the Nasdaq’s 2.22 percent drop on the same day. Coming into that session, the maker of semiconductor production equipment had gained roughly 48 percent over the previous month, leaving technical indicators in overbought territory.

Investing.com attributes the roughly 8.5 percent intraday slide to a combination of factors, including a global semiconductor downturn, insider selling and a risk-off mood triggered by a near 10 percent plunge in South Korea’s KOSPI index that activated double circuit breakers and spilled over into chip equipment names. The report also notes that concerns around free cash flow and a weakening macro backdrop have encouraged profit-taking after an exceptional two-week rally in the stock.

Morgan Stanley stance and consensus view

According to Investing.com, Morgan Stanley has turned more cautious on wafer fabrication equipment spending for DRAM and reiterated a preference for Lam Research over Applied Materials, having moved AMAT to an Equal-weight stance in May with the argument that its growth trajectory largely matches broader 2027 market expectations and that its valuation premium may be hard to sustain. This relative preference has added pressure on the shares as investors reassess positioning within the equipment peer group.

In contrast, MarketScreener data compiled from multiple research houses show that Applied Materials still carries a broadly positive analyst backdrop, with several recent Buy reiterations from firms including BofA Securities, Wells Fargo and New Street Research in June. A separate MarketBeat summary cited by US media reports that around 35 firms cover the stock and that the average recommendation stands at "Moderate Buy", reflecting an overall constructive stance despite short-term volatility.

AI demand and equipment cycle backdrop

Investing.com underlines that, despite the pullback, Applied Materials benefits from a robust fundamental backdrop featuring record second-quarter revenues and an upgraded full-year growth outlook for its semiconductor equipment business, helped by infrastructure spending for artificial intelligence workloads. The article notes that the stock had advanced from a recent low near 154 dollars to a high around 641.18 dollars, an increase of more than 300 percent over a broader period, before the latest correction.

Additional commentary cited by MarketBeat points out that Applied Materials has recently introduced two chipmaking systems aimed at next-generation AI chips, which could support demand as hyperscalers and foundries expand capacity. Positive sentiment in these notes suggests that AI-driven semiconductor spending can underpin the company’s premium valuation and earnings trajectory over the medium term, even if short-term trading remains sensitive to macro news and sector flows.

The equipment platforms behind the stock

Applied Materials generates most of its revenue by supplying semiconductor manufacturers with deposition, etch, inspection and metrology systems used to build advanced logic and memory chips, with a significant share of sales linked to leading foundries and memory producers in Asia and the United States. Key product platforms include materials engineering systems that enable patterning at cutting-edge process nodes, wafer inspection tools and integrated solutions for advanced packaging, all of which are critical for chips used in AI accelerators, data centers and high-end consumer devices.

Where the shares trade today

The Applied Materials shares (US0382221051) last closed on Nasdaq at 585.88 US dollars on 2026-06-23, according to data compiled by Zacks and exchange price sources.

This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell securities.