A Red-Hot Tech Trade Continues to Cool

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The selloff in chip stocks may be justified, according to new data.

Global sales grew just 13.8 percent in September, according to numbers released Friday by the Semiconductor Industry Association. That was the weakest monthly growth since December 2016, and follows a pattern of ticking lower since the summer:

  • June’s growth was 20.5 percent
  • July’s growth was 17.4 percent
  • August’s growth was 14.9 percent

Price action in the market has anticipated this weakness. The Philadelphia Semiconductor Index ($SOX) never made a new high after March, even though the Nasdaq-100 and broader technology sector kept rising. There’s also been persistent weakness in supplier companies like Applied Materials (AMAT) and Lam Research (LRCX).

Recent announcements from companies like Texas Instruments (TXN), Advanced Micro Devices (AMD) and Micron Technologies (MU) have also showed business weakening.

In conclusion, the market clearly anticipated a slowdown in the chip space. And now the data shows those worries are panning out.

Philadelphia Semiconductor Index ($SOX)
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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.