A technician pushes a cart of semiconductor wafers at the Applied Materials facility in Santa Clara, Calif.
David Paul Morris/Bloomberg
Chip stocks such as Applied Materials and Nvidia were falling Tuesday as rising Treasury yields pressured fast-growing tech shares.
In addition, New Street Research downgraded Applied Materials (ticker: AMAT) to Neutral from Buy with a $140 price target. The stock was off 3.83% in premarket trading Tuesday to $137.27. The average target price of analysts surveyed by FactSet is $164.15.
New Street said Applied Materials’ valuation vs. the iShares Semiconductor ETF (SOXX) “is still very reasonable, but we don’t see a near-term catalyst for a rerating. We maintain our strong positive long-term conviction, but tactically downgrade to Neutral, $140 Target Price.”
The analysts also downgraded ASML Holding to Neutral from Buy in a larger call on the semiconductor capital equipment sector, which New Street said was “getting closer to a cycle peak.”
Other semiconductor leaders such as Advanced Micro Devices (AMD) and Micron Technology (MU) were declining. Micron reports fiscal fourth-quarter results after Tuesday’s closing bell.
Citi Research analyst Christopher Danely expects Micron to report earnings in line with Wall Street estimates, and that executives will issue guidance below fiscal first-quarter forecasts.
Higher bond yields have been putting pressure on technology stocks. The tech-heavy Nasdaq fell 0.5% on Monday and was indicated to open down more than 1.5% on Tuesday.
Elevated yields, as well as higher interest rates, typically lower the current value of future cash flows, hitting high-growth technology companies that expect significant profit in future years.
Write to Joe Woelfel at [email protected]
