Applied Materials shares moved firmly lower in early Friday trading as analysts weighed in on the chip-equipment maker's stronger-than-expected fiscal-fourth-quarter earnings report and what they saw as a muted outlook for non-AI-chip demand heading into next year.

Applied Materials  (AMAT)  is a key player in the AI investment story, as it provides the equipment to produce the chips that power everything from flat-panel TVs to personal computers and smartphones.

Hyperscalers such as Google  (GOOGL) , Microsoft  (MSFT) , Amazon  (AMZN)  and Meta Platforms  (META)  are poised to spend hundreds of billions building and training their large-language models. Analysts see part of the investments from these cloud-service providers trickling down to the sectors in which Applied Materials has the strongest hold.

But that demand is seen as potentially soft next year as companies allocate spending to AI projects and forecast new investments in areas such as memory and ICaps. These are chips for the internet-of-things, as well as communications, automotive, power and sensors applications.

Applied Materials sees current-quarter earnings in the region of $7.15 billion, with a margin for error of $400 million. The forecast fell modestly short of Wall Street forecasts and clouded the group's stronger-than-expected Q4 report.

Concern about China sales at AMAT

So did concern that export restrictions on high-end technology to China from a new Trump administration would weigh on sales in the region, which not long ago accounted for around 45% of overall revenue.

China sales were pegged at around 30% of revenue over the three months ended in October, a level the group sees maintaining over the final months of calendar 2024.

Chief Executive Gary Dickerson remained focused, however, on the group's ability to develop so-called inflections, which are key changes to chipmaking processes that improve power and efficiency and boost profit margins.

That could be why the group's profit outlook for the quarter, around $2.29 a share, topped Wall Street forecasts.

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"There's a lot of really great inflections that provide a tailwind for Applied," he added during a conference call with investors late Thursday. "And we're bringing enabling technology to our customers in a number of different markets. So, one thing that is also a tailwind for us is pricing improvement as we're shipping more valuable products."