Chip stocks were on track for their worst day in nearly two months and sliding into correction territory Monday with the tech sector in retreat even as the broader market traded just short of record highs.
The PHLX Semiconductor Index SOX, -4.66% dropped 4.2% in recent activity, putting it on par with a similar 4.2% drop on March 18, and on track for its worst decline since March 8, when it closed down 5.4%.
In comparison, the tech-heavy Nasdaq Composite Index COMP, -2.55% retreated 2.3%, and the S&P 500 index COMP, -2.55% slipped 0.7%, versus a 0.3% uptick in the Dow Jones Industrial Average DJIA, -0.10%. Both the S&P 500 and the Dow were 1% or less off their record highs.
Meanwhile, the SOX index is nearly 10% off its recent record closing high of 3,301.26 set on April 8.
Qualcomm Inc. QCOM, -6.46% shares were among the biggest laggards in the chip sector following reports that noted Apple Inc. AAPL, -2.58% analyst Ming-Chi Kuo of TF International Securities told clients that the smartphone giant plans to start using its own 5G chips inside its phones as early as 2023. Apple gets its 5G chips from Qualcomm and as recently as 2019, paid Qualcomm nearly $5 billion in a settlement over the chips.
Intel Corp. INTC, -2.95% shares were down following a downgrade from Atlantic Equities. Analyst Ianjit Bhatti downgraded Intel to underweight from neutral because he said the chip maker’s plans to build out capacity, also known as “IDM 2.0,” didn’t address the company’s bleed out of market share to smaller rival Advanced Micro Devices Inc. AMD, -3.58%. Bhatti had upgraded the stock to neutral amid the surge of optimism from the appointment of Patrick Gelsinger as chief executive.
“While IDM 2.0 may be the best long-term strategy, we believe it will drag on profitability until at least 2025, and does nothing to address continuing market share losses to AMD,” Bhatti said.
Companies that make equipment for silicon-wafer fabricators also lagged following strong earnings a few weeks ago as chip makers pour money into capital projects amid a semiconductor shortage. Shares of KLA Corp. KLAC, -6.19%, Lam Research Corp. LRCX, -6.99%, and Applied Materials Inc. AMAT, -6.21% were all down 5% or more Monday.
Better-than-average performers, but still down for the day, included Nvidia Corp. NVDA, -3.69%, Taiwan Semiconductor Manufacturing Co. TSM, -3.87%, Texas Instruments Inc. TXN, -3.04%, and Broadcom Inc. AVGO, -3.64%
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