What’s Wrong With The Chip Stocks?

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So, this sure is a nice day for stocks. But not chip stocks.

Are investors getting worried about Q3 results - or Q4 guidance? If you happen to be nervous about the near-term prospects for the sector, it would seem logical to take profits given fat gains off the March market bottom. Even so, there is something a little disconcerting about seeing these stocks, which played a starring role in the recent advance, start to falter.

While Intel (INTC) and Advanced Micro Devices (AMD) have moved a few pennies into the black after trading down earlier, many other chip names are trading lower, including Nvidia (NVDA), ON Semiconductor (ONNN), Marvell (MRVL), Altera (ALTR), Atmel (ATML), Trident (TRID), Monolithic Power (MPWR), RF Micro Devices (RFMD), Skyworks (SWKS), Xilinx (XLNX), Microchip (MCHP), Broadcom (BRCM), Anadigics (ANAD), NetLogic (NETL), Micrel (MCRL), Texas Instruments (TXN) and Taiwan Semiconductor (TSM).

I would note that over the last couple of days there have been several cautious notes on specific names in the group.

As I noted earlier, Baird analyst Tristan Gerra today downgraded Broadcom, citing among other things slowing demand for set-top boxes and customer premise equipment from the carrier market, and some potential double-ordering by customers that has pushed current demand above true end-market consumption.

Yesterday, UBS analyst Jonah Cheng cut his ratings on the contract chip makers Taiwan Semi and United Microelectronics (UMC), asserting that a period of demand acceleration ahead of the launch of Microsoft Windows 7 and the National Day holiday period in China were coming to an end. Cheng wrote that he expects Q1 2010 sequential revenue declines of 10%-20% at fabless Asian chip companies, weaker than the typical seasonal drop of under 1%.

While the Nasdaq Composite today is up more than 1%, the SMH, the semiconductor ETF, is down 8 cents, or 0.3%, to $25.12.



If you have other thoughts on why the chip stocks are down, let’s hear them.