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Chipmakers Tumble as Trade Tensions Add to Recent Concerns

Ryan Vlastelica

(Bloomberg) -- Semiconductor stocks tumbled in on Monday, extending a recent decline as the escalating trade war between the U.S. and China added to headwinds surrounding the sector.

Chipmakers were broadly weaker, with the Philadelphia Semiconductor Index down 3.6% in its fifth straight daily decline, its longest such losing streak since October. The benchmark index has lost more than 10% over the five-day slump and trade tensions have been a primary driver of the recent decline, as many chipmakers count China as a major market or as a key part of their supply chains

Among specific names, Intel Corp. fell 3.4% while Texas Instruments Inc. lost 3.3%; both were in their fifth straight negative session. Micron Technology Inc. was off 5% and Nvidia Corp. sank 5.9%. The VanEck Vectors Semiconductor ETF -- an exchange-traded fund that tracks a basket of chipmakers -- fell 3.2%, and its pre-market trading volume was the highest since May 31, according to data compiled by Bloomberg.

Also in focus on Monday was the latest data from the Semiconductor Industry Association, which showed total semiconductor sales fell 17.7% in June.

RBC Capital Markets said that within the sub-sector of DRAM memory chips, average selling prices were down 46% in June, “the worst decline since March of 2008.”

Analyst Mitch Steves wrote that he was “surprised to see the severity of ASP declines across the board,” although he doesn’t think they are likely to get worse from current levels.

While the SIA data showed month-over-month growth of 4.9%, Deutsche Bank described the report as “another soft month of data” and said it came in below the bank’s expectations. The firm affirmed its cautious stance on the sector, with analyst Ross Seymore writing that “headwinds continue in the semi space, corroborated by weak SIA data & 2Q prints/3Q guides in earnings season thus far.”

Among notable results, Advanced Micro Devices Inc. cut its full-year forecast last week, while Qualcomm Inc. gave a disappointing fourth-quarter sales outlook. On the upside, Western Digital Corp. reported fourth-quarter revenue that missed expectations, but the company’s chief executive officer said it had “reached a cyclical trough.”

Over the weekend, ON Semiconductor Corp. reported second-quarter revenue that missed expectations and gave a weak third-quarter outlook. The stock slumped 9.9% in its biggest one-day drop since November 2015.

(Update share prices, adds Nvidia in third paragraph)

To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Will Daley

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