Home Stocks Micron, KLA-Tencor warnings send chip-related stocks to worst day in more than two months

Micron, KLA-Tencor warnings send chip-related stocks to worst day in more than two months

5 min read

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

SOX, -2.67%

 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

SPX, -0.37%

 declined 0.4% and the Nasdaq Composite Index

COMP, -0.91%

 finished down 0.9%.

Hardest hit were shares of Micron Technology Inc.

MU, -9.87%

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.

KLAC, -9.72%

 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.

LRCX, -6.97%

 dropped 7% to close at $160.05 and Applied Materials Inc.

AMAT, -5.25%

 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.

AMD, -2.35%

 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.

ENTG, -8.23%

, Marvell Technology Group Ltd.

MRVL, -4.98%

, MKS Instruments Inc.

MKSI, -8.21%

, Qorvo Inc.

QRVO, -5.71%

, ON Semiconductor Corp.

ON, -3.07%

, Cypress Semiconductor Corp.

CY, -3.79%

 and Teradyne Inc.

TER, -3.23%


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