Tech & AI
Applied Materials tumbles after China's CXMT reports memory chip progress
Applied Materials tumbled 6.7% on Tuesday after Chinese memory maker CXMT reported progress on a denser memory-cell design, raising competition worries across chip stocks.
Quick Read
- Applied Materials tumbled 6.7% after Chinese memory maker CXMT reported progress on a denser memory-cell design.
- Micron and SK Hynix also fell, after selling that began in Seoul spread to U.S. chip stocks.
- The S&P 500 was little changed, and a broad semiconductor fund fell 0.5%.
- The worry is competition: a more efficient Chinese design could pressure established memory makers.
What happened to chip stocks on Tuesday?
Applied Materials (Nasdaq: AMAT) tumbled 6.7% on Tuesday and closed at $464.24. It had ended the previous session at $497.53. Shares worth $5.1 billion changed hands during the day.
Why it matters: Memory makers lost ground too. Micron Technology (Nasdaq: MU) fell 3.6% to $953.19. U.S.-traded shares of SK Hynix (SKHY) fell 3.2% to $157.06.
Why did the shares fall?
The trigger came from China. CXMT, a Chinese memory chip maker, reported progress on a denser and more efficient memory-cell design. A memory cell is the tiny unit on a chip that stores data.
The selling began in Seoul. Shares of Samsung Electronics and SK Hynix fell sharply there, according to reports, and South Korea's main stock index dropped steeply. The pressure then spread to U.S. chip stocks.
The worry is competition. A Chinese maker that packs more memory into less space could pressure prices and market share for established makers such as Samsung, SK Hynix and Micron.
Applied Materials does not make memory chips. It sells the machines chipmakers use to build them. Reports did not give a specific reason for its steeper drop.
Did the selling spread to the wider market?
Not much. The VanEck Semiconductor ETF (Nasdaq: SMH), a fund that holds a basket of chip stocks and trades like a single share, fell 0.5%.
The Nasdaq-100, which leans heavily on tech companies, fell 0.3% to 30,569.48. The S&P 500 was little changed at 7,805.45.
Other parts of the market gained. The energy sector fund gained 1.8%, and the communication services fund rose 0.7%. Among 1,294 stocks tracked, 665 fell and 624 rose.
That gap is the main counterpoint to the chip selloff. A broad fund spreads its money across many companies, so losses concentrated in chips reach it in small doses.
What could move chip stocks next?
The reports described progress on a design. They did not say when, or whether, it could reach mass production.
The next scheduled events are economic rather than company news. The September Consumer Price Index, the government's main inflation gauge, is due Oct. 14 at 8:30 a.m. ET. The Federal Reserve announces its next interest-rate decision on Oct. 28 at 2 p.m. ET.
The inflation report and the Fed decision could sway tech shares broadly. Neither speaks directly to memory chip competition, though.
For readers
What it could mean for you: People who own Applied Materials, Micron or SK Hynix shares directly felt Tuesday's drop in full, with no other holdings to cushion it. Unlike a broad fund, a single stock carries every piece of company news. If worries about Chinese memory chip competition persist, these shares could keep swinging more than the wider market. Further reports on CXMT's design may shape how those shareholders fare in the weeks ahead. Comments from the companies about competition may matter too.
Questions and answers
Why did Applied Materials stock fall?
Applied Materials tumbled 6.7% on Tuesday after Chinese memory maker CXMT reported progress on a denser memory-cell design. The news set off selling in chip stocks that began in Seoul and spread to the U.S.
What is CXMT, the company behind the chip news?
CXMT is a Chinese memory chip maker. Its reported progress on a more efficient memory-cell design raised concern that it could compete harder with Samsung, SK Hynix and Micron.
Did the chip selloff hit the broader stock market?
Only lightly. The losses stayed mostly in chip stocks. Energy and communication services shares rose. The S&P 500 was little changed, and the Nasdaq-100 fell 0.3%.
What could move chip stocks next?
The September inflation report is due Oct. 14, and the Fed announces its next rate decision on Oct. 28. Further news on CXMT's design could also matter for memory chip makers.
The numbers
| Micron Technology (MU) price | $953.19 |
|---|---|
| Micron Technology (MU) change | −3.62% |
| Applied Materials (AMAT) price | $464.24 |
| Applied Materials (AMAT) change | −6.69% |
| SK hynix (SKHY) price | $157.06 |
| SK hynix (SKHY) change | −3.19% |
| S&P 500 change | −0.02% |
| 10-year Treasury yield | 5.21% |
Tuesday’s close
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Not investment advice.
