For investors, one result of the chip slowdown has been falling prices for the nine major exchange-traded funds tied to semiconductor indices. The biggest, the $1.4 billion iShares PHLX Semiconductor ETF, fell 6.6 percent on Wednesday alone, according to ETF Database. The VanEck Vectors Semiconductor ETF, with $870 million in assets, posted its biggest downturn for the group since November 2008 on Wednesday. It had outflows of almost 40 percent of its assets last week.
Each chip company is a little bit different, based on the end market it serves, CFRA Research analyst Angelo Zino said. Texas Instruments’ bobble has raised concerns in part because of slowing growth in its automotive markets, raising concern that if automakers are buying fewer sensors for Internet connectivity in machines, they may be anticipating a slowdown in their own sales.
“They tend to be a good barometer for the economy because their chips go into almost everything,” said Zino. “Investors have to decide if it’s a hard landing or a soft landing.”
For now, Zino said, he’s betting that the chip industry and TI are in for more of a soft landing than a hard fall — but that could change.
The rub is that TI, in particular, attributed its revenue slowdown to customers building inventories more slowly, or even reducing them — distributors, rather than companies that put chips into products, are slowing orders the most. That means the slowdown may just reflect more caution in the supply chain, rather than any major problem in markets for cars and cellphones, Zino said.
On the other hand, the market is worried that the chip slowdown may be an early indicator of problems that Trump’s tariff increases this year are causing, and of issues that plans to impose 25 percent levies on $200 billion of Chinese exports to the United States in January might cause later, he said. But over time, even that would be overcome by secular trends like the rise of cloud computing and the Internet of things, he added.
AMD tanked because fourth-quarter guidance was 9 percent below consensus estimates and 18 percent lower than Goldman Sachs’ prior expectation, Goldman analyst Toshiya Hari said in a note to clients. On big problem is the waning of the cryptocurrency craze, which cut into one high-profile market for AMD products, and the company isn’t gaining market share in cloud-computing servers as fast as some investors expected.