HomeBusinessPrediction of materials used makes no impression after the rally

Prediction of materials used makes no impression after the rally

(Bloomberg) — Applied Materials Inc., the largest U.S. maker of chipmaking machinery, failed to impress investors with its latest forecast after a rally in shares this year.

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Fiscal third-quarter revenue will be about $6.65 billion, the company said in a statement Thursday. While this was higher than the average Wall Street estimate, some analysts had forecast revenues as high as $7.13 billion. Excluding some items, earnings will be $1.83 to $2.19 per share for the three-month period through July. Analysts forecast $1.98.

Investors have been looking at Applied Materials for signs that a chip recovery is well underway. The company is a major supplier to the industry’s largest manufacturers: Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co. and Intel Corp. That makes its outlook an indication of demand in a crucial part of the electronics supply chain.

Shares of the Santa Clara, California-based company fell 1.5% in extended trading. They closed earlier Thursday in New York at $214.17, sending the stock up 32% this year.

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Second-quarter profit was $2.09 per share, excluding some items, while revenue was $6.65 billion. That compared with estimates of $1.99 for earnings and $6.52 billion for revenue.

Applied Materials said demand for machines used to produce artificial intelligence processors is growing. But some customers that make semiconductors used for what the company calls ICAPS — internet-connected devices, communications and automotive, as well as power and sensors — are pausing orders while they install machines they’ve already received.

“There will be some digestion in the short term,” Chief Executive Officer Gary Dickerson said in a telephone interview. “This year will not be a year of significant growth for us.”

Dickerson said he is extremely optimistic about the prospects for AI-related chips and predicts that such processors will soon overtake the smartphone and PC industries in terms of the amount of silicon consumed.

China accounted for 43% of the company’s revenue last quarter. Like some peers, Applied Materials is benefiting from huge investments by Chinese companies – part of that country’s push to achieve greater independence in the production of key electronic components.

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Although American companies are barred from supplying China with the most advanced manufacturing equipment, they are getting a flood of orders for equipment used to make simpler types of chips: semiconductors typically used in cars and industrial machinery.

That rapid increase in orders from one country has raised concerns among investors, who fear that geopolitical tensions could ultimately cut off that source of growth. Washington and the European Union have already imposed restrictions on exports of advanced machinery, but officials are now concerned that China could gain an edge in the production of certain, less advanced chips.

Last November, shares of Applied Materials plunged after a report that the Justice Department was investigating the company for its dealings with China’s largest chipmaker, Semiconductor Manufacturing International Corp. Applied Materials has said the investigation had previously been made public and that it is cooperating.

“We see that China remains resilient,” Dickerson said. Still, he added, “You’re not going to see the growth rate you’ve seen in recent years.”

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(Updates with more results from the fifth paragraph.)

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