Chip Stocks Slump but Remain a Big Winner in 2019 -- Update
September 27 2019 - 5:08PM
Dow Jones News
By Alexander Osipovich
Semiconductor stocks took a beating Friday, dragged down by
disappointing results from Micron Technology Inc.
Analysts generally agree, though, that the sector is poised to
benefit as demand for memory chips recovers and as the U.S. and
China continue talks about a trade deal.
Micron shares fell 11% -- their biggest percentage decline this
year -- a day after the company reported a steep drop in revenue
and released a disappointing earnings forecast. That weighed on
stocks like Lam Research Corp., which fell 5.3%, and KLA Corp.,
down 2.1%.
But the sector has still outperformed this year. Even with
Friday's drop, Micron is up 36% since the start of 2019, while Lam
Research has climbed 69% and KLA is up 77%. The iShares PHLX
Semiconductor exchange-traded fund has gained 34%, handily beating
the 18% rise in the S&P 500 over that period.
Semiconductors are a famously cyclical industry, driven by
fluctuating demand for the chips used in everything from computers
to iPhones and smartwatches. That cycle is at a low point: Global
semiconductor sales fell 16% in July from a year ago, according to
the Semiconductor Industry Association. But many analysts expect a
rebound.
"We are optimistic around 2020," Wedbush said in a research note
Friday, projecting that demand for memory chips would pick up next
year with growing adoption of new 5G smartphones and the rollout of
new gaming consoles.
The U.S.-China trade war caused volatile trading in recent
months in chip maker stocks, which often have complex supply chains
extending to China. High-level trade talks are set to resume next
month, which has fueled some optimism that a resolution could be
near.
Write to Alexander Osipovich at
alexander.osipovich@dowjones.com
(END) Dow Jones Newswires
September 27, 2019 16:53 ET (20:53 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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