Chipmakers tumble on warnings of painful downturn in a decade

Semiconductors stocks tumbled after Micron Technology Inc. became the latest chipmaker to warn about slowing demand, triggering concern the industry is heading into a painful downturn.

In the US, the Philadelphia semiconductor index sank 4.6 percent on Tuesday with all 30 members in the red, its biggest fall in about two months. In Asia, chip stocks from Taiwan Semiconductor Manufacturing Co. to Samsung Electronics Co., SK Hynix Inc. and Tokyo Electron Ltd. slumped.

Investors are growing increasingly skittish the notoriously cyclical industry is hurtling toward a prolonged slump after years of widespread shortages that led to heavy investments in capacity.

“We continue to believe we are entering the worst semiconductor downturn in at least a decade, and possibly since 2001 given the expectation of a recession and inventory build,” Christopher Danely, a Citigroup Inc. analyst, said in a report. “We expect every company in our coverage universe and every end market to experience a correction.”

The warning from Micron came after disappointing results from Nvidia Corp., Intel Corp., and Advanced Micro Devices Inc.

Highlighting the speed with which demand is evaporating, Micron said orders have deteriorated since the company last gave an update just over a month ago. While the personal computer market had already been in a slump, the weakness in demand is now spreading widely.

“Compared to our last earnings call, we see further weakening in demand because of adjustments broadening outside of just consumers to other parts of the market including data centers, industrial and automotive,” Chief Executive Officer Sanjay Mehrotra said in an interview with

Bloomberg Television.

Semiconductor stocks surged at the start of July, driven in part by expectations that endemic shortages will prop up demand even in the midst of an economic slowdown. But they became a major drag on the broader Nasdaq 100 Stock Index after a string of disappointing financial results and forecasts from chipmakers including Nvidia. The benchmark rallied nearly 20 percent from a June low before memory and hard disk drive maker Western Digital Corp. helped fuel a selloff in the wake of a weak sales forecast on August 5. The Nasdaq 100 has fallen for three straight days since.

“It appears to be a challenging market for everyone after both Nvidia and Micron had to slash their outlooks,” said Edward Moya, senior market analyst with Oanda.

During the COVID-19 pandemic, consumers stocked up on smartphones and computers as they worked and studied from home. Corporations poured money into technology too, especially data centers that could be used to enable remote workers.Chip shortages remain a factor.