Key Highlights

● Applied Materials closed at $375.58 on October 22, among the Nasdaq-100's heavier decliners.

● Lam guided China sales meaningfully down from the September quarter.

● Needham cut its Lam price target to $290 from $390.

● Teradyne reports on October 27.

Applied Materials (NASDAQ:AMAT) sank on Thursday, October 22, 2026, closing at $375.58 and ranking among the heavier decliners on the Nasdaq-100.

The chip-equipment maker had no company-specific news. Its slide was a direct read-through from Lam Research (NASDAQ:LRCX), a close rival whose quarterly report late Wednesday highlighted supply constraints across the industry.

Lam's results set the tone

Lam reported record revenue of $8.22 billion and adjusted earnings of $2.20 a share, beating expectations. But its guidance for the December quarter, revenue of $8.6 billion, plus or minus $400 million, was in line with official consensus yet below what buy-side investors had hoped for. Lam also guided China sales "meaningfully down" from the September quarter.

The bigger concern was supply. Lam's chief financial officer said revenue would have been higher without "near-term supply chain constraints that we are actively managing," and said "things are going to continue to be constrained." Lam's chief executive said clean-room and component constraints will "limit chip makers and equipment companies' ability to fully meet end demand" into 2027.

Lam's shares plunged, and analysts cut targets. Needham lowered its price target to $290 from $390, and Morgan Stanley cut its target to $339.

Why Applied Materials followed

Applied Materials and Lam sell many of the same kinds of tools, such as deposition and etch equipment, to the same chipmakers. When Lam says clean rooms and components are in short supply, investors assume similar limits will apply to its competitors.

Applied Materials was already down sharply in the morning, trading around $385.41 and the losses deepened into the close. KLA (NASDAQ:KLAC), another major equipment maker, plunged, and test-equipment specialist Teradyne (NASDAQ:TER) also dropped heavily. Smaller suppliers such as FormFactor (NASDAQ:FORM) and Cohu (NASDAQ:COHU) were hit as well.

AI worries piled on

The equipment selloff coincided with a broader retreat from AI stocks. Meta Platforms (NASDAQ:META) narrowed its 2026 capital-spending range to $135 billion to $145 billion and swung to negative free cash flow of $2.12 billion, its first cash outflow in more than a decade, according to market data. Nvidia (NASDAQ:NVDA)'s chief executive said that "the demand of the capital is much greater than the availability of the capital."

The Philadelphia Semiconductor Index had its biggest one-day decline since June 23. The Nasdaq-100 lost about $1.32 trillion in market value. The Nasdaq Composite fell 694.00 points to 26,008.86, and the S&P 500 dropped 93.74 points to 7,663.43, its worst day since July.

A note of reassurance

Lam's comments were not all negative. The supply constraints reflect demand that the industry cannot yet fully meet, rather than a lack of orders, according to the company's description. That distinction could matter for equipment makers once supply chains catch up.

Applied Materials Faces Its Own Outlook Scrutiny

Teradyne reports on October 27, offering the next read on the chip-equipment group. Investors will watch for signs of whether supply constraints are easing, and for commentary on China demand. Next week's earnings from Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) on October 28 and Amazon (NASDAQ:AMZN) on October 29 will also shape expectations for chipmakers' spending on new equipment. Applied Materials' own outlook, when it next reports, will be scrutinized for any echo of Lam's warning.