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Texas Instruments reserves the chip sector and investors' hopes for recovery



The recent surge in semiconductor stocks hit a speed Tuesday afternoon that could turn into much more.

Texas Instruments Inc.

TXN, -1.80%

gave a forecast that was much worse than expected in Tuesday's earnings report, with a new range of revenue estimates that fell by half a billion dollars below the Wall Street consensus estimate of revenue. This was not welcome news for investors who have shipped higher stocks of chips in recent months in the hope that the downturn in the semiconductor industry will hit its third quarter results and begin to turn over the last three months of the year. [1

9659002] Philadelphia Semiconductor Index

SOX, -0.77%

has grown by nearly 40% this year, continuing its roller coaster ride as semiconductor decline continues. The index grew especially in the last quarter, adding 6.3% to the S&P 500 index

SPX, -0.36%

accumulated only 1% and the Dow Jones Industrial Average

DJIA, -0.15%

dropped 1.2%.

TI's shares fell nearly 10% on Tuesday's trading hours, while other semi-stocks also fell, as TI executives blamed wide-ranging based weakness among their clients, plus ongoing trade issues. Intel Corp.

INTC, -0,23%

and Advanced Micro Devices Inc.

AMD, -1.62%

lost 1.6%, Nvidia Corp.

NVDA, -0.20%

dropped 2.1% and Xilinx Inc.

XLNX, + 0.97%

sank 1.7%.

When analysts tried to get more specific information from the company about what exactly was causing the shortfall, TI executives responded in rather vague general terms, refusing to call for a downside.

"This is due to macro events, and in particular to trade tensions, and if you think about when trade tensions and barriers to trade arise, what does a business do? They are becoming more cautious and pulling back, and we are at the very end of the long supply chain, "TI Chief Financial Officer Rafael Lizardi told analysts. "That thing we've been in, it's [has been] for four quarters, and it will be longer than that."

Some analysts wondered if TI's problems were due to its new strategy of selling more chips directly to customers and cut ties with some of its largest distributors. But TI executives said it was not a factor and that its changes in distribution and its closer relationship with its client "bring more rewards than risk and give us more access to these customers."

they are just far more cautious than they are, certainly a year ago, but even 90 days ago and many are talking about caution. They mention the trade tension that we know has been happening and has been building up over the last three or four quarters, "Lizardi said when asked for more details behind the new directions.

If TI is an example, investors may have to abandon the idea of ​​short-term reimbursement, as this column warns since the initial reimbursement was originally proposed. Combined with disappointment from IBM Corp.

IBM, + 1.04%

and Netflix Inc.

NFLX, -4.09%

Last week, the technology earnings season began to boom and all eyes now turned to Xilinx and Intel as they prepared to give more information about the chips later this week.


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