Chips Ahoy!

Semiconductor manufacturers are one of the more volatile sectors of the technology industry given the capital intensive, high fixed cost nature of their business. Semiconductor stocks are also very cyclical given that chips can be found in every industry and every country around the world. So, the chip stocks are a great barometer of the overall health of the economy and tend to lead the market up and down, similar to the banking stocks. Like the financials, the semiconductors peaked in early 2018 and have been making lower highs and lower lows in the intervening months. In recent days, the semiconductor stocks have broken down sharply. Texas Instruments reported disappointing earnings results this week and noted that most of their markets are beginning to slow down. Their stock was hit for -5% after hours. Advanced Micro Devices reported earnings on Wednesday evening after the close and also disappointed shareholders. AMD was clubbed by -20% last night. The global economy is slowing down. Interest rates are still on the floor so there is little room to cushion the next downturn.

 
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