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StockBeat - Chip Stocks Turn in Sluggish Performance Despite Upbeat Outlook

Investing.com - Chip stocks struggled to advance on Wednesday, even as analysts delivered an upbeat assessment of the sector.

The Philadelphia Semiconductor Index was down 0.2%, but is up nearly 19% for the quarter.

Micron Technology (NASDAQ:MU) struggled to advance, rising just 0.3%, despite RBC resuming coverage on the stock with an outperform rating, saying the chipmaker is set to improve performance in the second half of the year.

The bullish outlook on the chipmaker comes as the bank sees a bottoming out of expectations on Micron and a rebound in data center spending in the second half of the year.

Like many of its rivals, Micron has faced pressure from falling memory prices as demand has slumped at various levels. Lower demand for smartphones has often been blamed as one of the driving forces behind the plunge in memory demand, but RBC said non-Apple smartphone demand will ramp up in second half of the year.

Western Digital (NASDAQ:WDC), meanwhile, advanced 1.92% after RBC resumed coverage on the storage company's stock with an outperform rating and a $55 price target.

The bank was impressed by the "operational excellence" in Western Digital's core hard drive business. Better-than-expected hyperscale spending growth in Chinese handsets is also expected to prove a tailwind for the company, the bank said.

In the M&A news, Quantenna Communications (NASDAQ:QTNA) soared more than 17% after it accepted a takeover bid from ON Semiconductor (NASDAQ:ON) in a deal worth about $1.07 billion.

The deal, announced on Wednesday, is expected to improve ON Semiconductor's connectivity portfolio and expand its offerings in the industrial internet of things market.

"ON's expertise in power management should allow the company to further expand Quantenna's product breadth in wi-fi," S.G. Cowen said in a note.

The deal is expected to close in the second quarter.

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