Applied Materials Inc. (NASDAQ: AMAT) shares dropped more than 4% in premarket trading on Friday after the company warned that spending on chipmaking equipment in China was expected to decline next year due to tightened U.S. export restrictions.

The semiconductor equipment maker said approximately $110 million worth of products were not shipped during its fiscal fourth quarter because of trade restrictions, which were later suspended following a meeting between U.S. President Donald Trump and Chinese President Xi Jinping last month.

Applied Materials added that expanded U.S. curbs on the export of advanced chip equipment to China would likely reduce its fiscal 2026 revenue by around $600 million. However, the company said rising business investments in artificial intelligence were expected to drive stronger demand for semiconductor equipment in the second half of next year.

For the fourth quarter, Applied Materials reported adjusted earnings of $2.17 per share on revenue of $6.8 billion, topping analyst estimates of $2.11 and $6.68 billion, respectively.

Looking ahead, the company guided for first-quarter adjusted earnings of $2.18 per share on revenue of $6.85 billion at the midpoint, above consensus expectations of $2.15 and $6.80 billion.