Chipmakers do battle as FANGs shine

The Fang cohort of megacaps, outside of Apple, push higher after weeks of struggles

It was chipmakers’ turn behind the tech woodshed last week, as investors punished shares of the leading producers of computer hardware.

Semiconductor stocks sank a third day Friday, with losses spilling over to Apple Inc as concerns mounted that smartphone demand would derail earnings growth at the same time China and the US skirmish on the trade front. Meanwhile, the Fang cohort of megacaps, outside of Apple, pushed higher after weeks of struggles. Even Microsoft, a sometimes member of the acronym, rose. “That’s the flavour of the moment in terms of the pain in tech land — it gets to software versus hardware,” Mike Bailey, director of research at FBB Capital Partners in Bethesda, Maryland, said by phone. “The advertising-linked companies, they took a big hit and now we’re off of that. Now we’ve gone from a software problem to a hardware problem.”

Apple sank 4.1 per cent, its steepest rout since early February. The Philadelphia Stock Exchange Semiconductor Index retreated for a third day, losing 1.2 per cent to bring its loss in the week to 4.4 per cent. Facebook, Netflix and Amazon.com were all up at least 1 per cent in the five days.

Lower growth forecast

Taiwan Semiconductor Manufacturing Co, Apple’s main chip supplier and often considered an industry bellwether, on Thursday predicted current-quarter sales of about a billion dollars less than analysts had projected. The major whiff renewed concerns over iPhone X demand and triggered a sell-off in chipmakers around the globe.

It didn’t help that the worrisome growth forecast came on the heels of a report by the International Monetary Fund earlier in the week that smartphone shipments declined for the first time. Apple investors weren’t calmed, either. “Apple, they’re not a semiconductor company, but they’re obviously a big smartphone hardware company, and if there’s a nearterm problem in that hardware space, they are going to take a hit,” Bailey said.

Applied Materials Inc, which sells TSMC production machinery, fell nearly 9 per cent last week. Broadcom, another TSMC customer and a major supplier of phone parts, declined 4 per cent. European chip stocks also weakened, with Dialog Semiconductor Plc and STMicroelectronics NV both dropping.