Chip-related stocks got pummeled for their worst day in more than two months Thursday after market outlooks from a few key players proved to be weaker than previously forecast.
The PHLX Semiconductor Index
fell 2.7% Thursday for its worst one-day percentage drop since June 25, when the index dropped 3.1%. In comparison, the S&P 500 index
declined 0.4% and the Nasdaq Composite Index
finished down 0.9%.
Hardest hit were shares of Micron Technology Inc.
The stock dropped 9.9% to close at $44.65 after the company, at a Citigroup conference, said prices of NAND chips, or flash memory chips used in USB drives and smaller devices, decreased in the third quarter. Shares of Micron are now 30% off their high of $64.66 set in late May.
NAND oversupply has worsened recently and smartphones don’t appear to be picking up the slack, said Baird analyst Tristan Gerra in a note Tuesday. Gerra, who has an outperform rating on Micron, lowered his price target on the stock to $75 from $100.
“For this second half, we continue to see a relative softening in smartphone units, both at Apple and in the China smartphone supply chain,” Gerra said.
Shares of chip-making equipment companies were also savaged after KLA-Tencor Corp.
at the same conference, forecast that a rebound in chip shipments for the second half of 2018 would likely not be as strong as expected as recently as six weeks ago. KLA-Tencor shares dropped 9.7% to finish at $107.28, while shares of Lam Research Corp.
dropped 7% to close at $160.05 and Applied Materials Inc.
shares fell 5.3% to $40.27.
The drop comes after the chip-equipment sector posted fairly strong earnings in late July and forecast that chip-demand weakness would bottom out in the September-ended quarter.
Meanwhile, Advanced Micro Devices Inc.
shares backed off 12-year highs, declining 2.4% to finish at $27.84 as the chip maker announced a new Zen-based Athlon desktop processor, with Radeon Vega graphics, for PC users.
AMD and Micron rank as the third and fourth most actively traded stocks, respectively, on the S&P 500 by average daily volume over the past 52 weeks, according to FactSet data.
Other chip-related stocks down 3% or more on the day included Entegris Inc.
, Marvell Technology Group Ltd.
, MKS Instruments Inc.
, Qorvo Inc.
, ON Semiconductor Corp.
, Cypress Semiconductor Corp.
and Teradyne Inc.
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