What happened
Monday was not a good day for chip manufacturing companies and the businesses that supply them. That morning, the government expanded its limits on U.S. exports of advanced computer chips to China. As a result, the share price of chipmaking equipment specialist Applied Materials (AMAT 1.65%) took a more than 4% tumble across the trading day.
So what
The limits, which cover high-end products such as those used in artificial intelligence (AI) applications and supercomputers, come on the heels of earlier measures aimed at curbing China's access to advanced chips. The government is concerned that the massive Asian nation could use such products for potentially threatening purposes.
The measure is being enacted by the Department of Commerce's Bureau of Industry and Security (BIS).
In a press release on the matter, the BIS quoted under secretary of commerce for industry and security Alan Estevez as saying that his "north star at BIS is to ensure that we are appropriately doing everything in our power to protect our national security and prevent sensitive technologies with military applications from being acquired by the People's Republic of China's military, intelligence, and security services."
Now what
With its size and prominence, China represents a huge market for chipmakers and their important partners, and Applied Materials is near the top of every list for the latter. Investors and analysts seem to be in alignment on the fallout Applied Materials and its peers will suffer.
Monday morning, in the latest of a set of price target cuts, Wells Fargo's Joseph Quatrochi substantially lowered his price target on the stock to $100 per share from the previous $125. Although he's maintaining his bullish stance on the shares with an overweight (read: buy) recommendation, that slice is fairly deep. Other prognosticators have made similar adjustments to their Applied Materials takes.
