A slowdown in global economic growth will weigh on computer chip makers due to the industry's sensitivity to macroeconomic conditions, according to Benchmark Research.
Analysts Gary Mobley said the recent partial government shutdown and the slowdown in the housing industry is causing consumers and businesses to feel less optimistic about the near-term economic future, which could trim overall spending.
Consumer spending drives about 70 percent of all economic activity in the U.S.
Mobley believes that uncertainty uncertainty is going to linger, with Congress due to address the debt ceiling again in February. Global economic growth rates are slowing, which is something chip industry sales are particularly sensitive to, he said.
"We feel this disconnect between share price performance and fundamentals is unsustainable," Mobley wrote.
There have already been some signals of lean times for chipmakers.
Intel two weeks ago said profit was flat in the third quarter, on slumping PC demand.
In connection with the sector downgrade, Mobley also cut his ratings for chipmakers Audience Inc. and ARM Holdings PLC to "Hold" from "Buy," saying that the shares of both companies have climb near his previous price targets for them. Two days later, shares of Xilinx slumped after issuing a weak forecast.
Last week, Texas Instruments said earnings and revenue fell in the third quarter, and Altera reported a 24 percent drop in revenue. Its outlook also disappointed investors.
Benchmark cut his rating for semiconductor makers on Monday to "Market Weight" from "Overweight.
Mobley downgraded Audience Inc., which fell 4 percent to $12.16 in midday trading.
Also falling was Xilinx Inc., which slid 10 cents to $44.54. Nividia Corp. fell 22 cents to $15.02. Lattice Semiconductor fell 11 cents to $4.95.