Applied Materials Shares Slide Following Reports of DOJ Investigation

Applied Materials

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  • Applied Materials shares fell following reports the U.S. Justice Department is investigating it for potential export violations.
  • The company allegedly sent equipment worth hundreds of millions of dollars to Chinese chipmaker SMIC without export licenses.
  • The news came as Applied Material reported better-than-expected results for its fiscal fourth quarter, with China accounting for 44% of the company's total sales.

Despite better-than-expected earnings, Applied Materials (AMAT) shares tumbled over 5% in early trading Friday following reports of a U.S. Department of Justice probe into potential export violations.

The semiconductor equipment maker is reportedly being investigated for evading export restrictions and sending advanced chipmaking equipment worth hundreds of millions of dollars to Chinese chipmaker SMIC without export licenses.

Citing national security concerns, the U.S. has imposed export controls curbing sales of advanced chips and chipmaking equipment to China. The Justice and Commerce Departments have also formed a task force to investigate and prosecute violations of these restrictions.

The news came as Applied Materials reported better-than-expected results, with fiscal fourth-quarter net income of $2 billion and earnings per share of $2.12, up from net income of $1.6 billion and earnings per share of $1.85 in the year-ago quarter, and above analyst estimates.

“Applied Materials delivered record revenue, earnings and cash flow in fiscal 2023 and is outgrowing the wafer fabrication equipment market for the fifth year in a row,” said Applied Materials CEO?Gary Dickerson in a release.

China made up 44% of total sales, with the company suggesting China sales could remain "elevated" in the current period because of some large shipments to a computer memory customer. However, Applied Materials suggested China's share of its sales would shrink to around 30% over time.

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  1. Reuters. "Exclusive: Applied Materials under US criminal probe for shipments to China's SMIC."

  2. Applied Materials. “Applied Materials Announces Fourth Quarter and Fiscal Year 2023 Results.”

  3. MarketWatch. "Applied Materials’ earnings beat expectations, but stock falls after report of criminal probe."

  4. Bloomberg. "Applied Materials Declines After Report of US Criminal Probe."

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