SAN FRANCISCO (AP) — Some semiconductor stocks finished lower Tuesday after a Morgan Stanley analyst downgraded the sector and individual stocks including Intel Corp. on a prediction that a boom in their share prices is in its "final innings."
The Philadelphia Semiconductor Sector index fell 3.89, or 1.3 percent, to close at 293.48.
Morgan Stanley analyst Mark Lipacis downgraded the sector from "Attractive" to "Cautious," saying the semiconductor index is up nearly 75 percent from its bottom but has started to underperform.
"We expect continued underperformance and are sellers on rallies," he wrote.
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Lipacis knocked down ratings of stocks including microprocessor maker Intel, whose shares fell 51 cents, or 2.7 percent, to finish at $18.50; graphics chip maker Nvidia Corp., whose shares fell 6 cents to $12.01; and memory chip maker Micron Technology Inc., whose stock rose 7 cents to close at $6.65.
Lipacis downgraded Intel, the world's No. 1 maker of microprocessors for personal computers and servers, because after two "blowout" quarters its earnings estimates have undergone "massive upward revisions," which has lifted the stock price. Lipacis wrote, however, that Wall Street may be underestimating Intel's potential to boost its gross profit margins.
Nvidia shares were downgraded on fears that cheaper products from Intel will erode Nvidia's chipset market share. Nvidia is the top maker of standalone graphics chips.
Lipacis noted that Micron's stock has declined since its 52-week high of $9.13 on Oct. 12 because of profit-taking and anticipation of a seasonal decline in memory chip prices. He thinks it will likely stay down in the near term because of concerns that PC makers have built up big stockpiles of chips and won't need to buy as many new ones.
Wedbush Securities analyst Betsy Van Hees also downgraded Micron's stock on signs that the supply of memory chips will likely be higher than demand in the first quarter, pressuring selling prices and profit margins.
Two chip stocks that Lipacis upgraded were Maxim Integrated Products Inc. and Linear Technology Corp. Lipacis wrote that Maxim has strong revenue growth and that the benefits from a new distribution deal are in the early stages.
Maxim shares rose 29 cents to close at $17.04, while Linear shares rose 27 cents to $26.25.