Chip-equipment stocks are priced as if next year's profits will come in 28% below forecasts
At the price investors paid for each dollar of forecast profit 90 days ago, today's share prices for Applied Materials, Lam Research, KLA and ASML only make sense if next year's profits come in about 28% below what analysts expect. The analysts are moving the other way: 12 raised their forecasts in the past 30 days and 1 cut. One of two things happens next. Either the forecasts fall toward what the prices imply, or these stocks now cost about 28% less per dollar of expected profit than they did in July. They are not alone: of the 124 stocks on the map, 6 had forecasts up 7% or more and shares down 10% or more, and 5 of the 6 are chip companies. In forward P/E terms, Applied, Lam and KLA had the 2nd, 4th and 5th biggest drops. Lam Research reports on Oct 21 after the close, and guidance that holds the forecasts up points to the second.
Each dot is one stock: every company in the S&P 100, the 100 largest US companies, plus the chip-equipment and software makers outside the index (KLA, ASML, Synopsys, Cadence, CrowdStrike, Snowflake, Datadog, MongoDB, Workday, Atlassian, HubSpot, Cloudflare, Zscaler, Fortinet, Shopify, and the server, chip and power names in the series). Across: how much Wall Street changed its forecast of the company's earnings per share for its next fiscal year over the last 90 days. Up: how much the stock moved over the same 90 days. Right means analysts got more optimistic; up means investors did. Bottom right is where the two disagree most: forecasts rising, stocks falling. Gold dots are the chip-equipment makers that build the machines every AI chip is made on; copper dots are software. The few stocks beyond the frame are pinned to its edge.
Chip equipment is the first link in the AI supply chain: orders for the machines that make chips turn before chip sales do. When these stocks and their forecasts split, it is an early read on whether the AI buildout is speeding up or cooling.
Wall Street's view, in its forecasts: next year's profits for these companies keep rising, with 12 increases and 1 cut across the four in the past 30 days.
The Signal deskOver the 90 days through Oct 20: Lam's forecast up 19.7%, shares down 17.5%; Applied up 10.4%, down 26.9%; KLA up 7.4%, down 24.7%; ASML up 11.0%, down 9.5%. The profit shortfall today's prices imply, at the price-to-forecast ratio of 90 days ago: Applied 33.8%, Lam 31.1%, KLA 29.8%, ASML 18.5%, an average of 28.3%. The map holds the S&P 100 (100 companies) plus the chip, server, power and software makers outside it, 124 stocks in all.
A gap this wide between what analysts expect and what prices imply rarely closes on its own; company guidance closes it. If Lam and its peers hold their outlooks over the coming weeks, the selloff overshot. If they trim, the analysts were late and the stocks were early.
Get The Signal by email
Two letters a week: a Mid-Week Check-In on Wednesdays and a Week in Review on Saturdays.
We use your address only to send The Signal. Unsubscribe any time. Privacy
Source: Yahoo Finance consensus estimates and daily closes, Oct 20, 2026; Nova One's calculation. Every number on the chart is computed from the source data in the same run that drew it. The Signal is research, not investment advice. How we work · Disclosures