The recent surge in semiconductor shares hit a speed hump on Tuesday afternoon that could turn into much more.
Texas Instruments Inc.
provided a forecast that was much worse than expected in a Tuesday earnings report, with a new revenue calculation area falling as much as half a billion dollars lower than the Wall Street consensus revenue estimate. This was not welcome news for investors, who have sent breeze stocks higher in recent months in the hope that a downturn for the semiconductor industry would hit its worse third quarter results and begin to turn around during the last three months of the year. [1
is up almost 40% this year, continuing a roller coaster ride as the semiconductor decline continues. The index has increased notably in the last quarter, adding 6.3% as the S&P 500 index
got just 1% and Dow Jones industrial average
has declined 1.2%.
Shares in TI tumbled nearly 10% in afternoon trading Tuesday, and other semi-stocks also fell as TI executives blamed broad-based weakness among customers, plus ongoing trading problems. Intel Corp.
and Advanced Micro Devices Inc.
lost 1.6%, Nvidia Corp.
fell 2.1% and Xilinx Inc.
XLNX, + 0.97%
As analysts tried to get more specific information from the company about the cause of the deficit, TI executives responded to rather vague generalities while refusing to call a bottom to the downturn.
"It is due to macro events, and specifically trade tensions, and if you think about when there are tensions in trade and barriers to trade, what does business do? They become more cautious and retreat, and we are at the end of a long supply chain, "TI Chief Financial Officer Rafael Lizardi told analysts." This thing we've been in, [has been] for four quarters, and it's going to be longer than that. "
Some analysts wondered if TI's problems were due to its new strategy to sell more chips directly to customers and cut ties with some of the biggest distributors, but TI executives said it was not a factor and that the changes in distribution and having a more direct relationship with the customer “ more benefits than it risks, and it gives us greater access to these customers. "
" Customers are just far more cautious than they were, certainly a year ago, but even 90 days ago, and many of them are talking about the caution "They mention the trade tensions that we know have happened and have been kind of accumulating over the last three or four quarters," Lizardi said when asked for more information behind the new guidance.
If TI is an example, investors may have to let go of the notion of a short-term improvement, as this gap has warned since initially suggesting a rebound in the second half. Combined with disappointments from IBM Corp.
IBM, + 1.04%
and Netflix Inc.
last week, the tech revenue season has got off to a rocky start, and all eyes are now moving to Xilinx and Intel as they prepare to provide more info on the chip sector later this week.