Chip stocks slide as AMD, Samsung expect steep fall in demand

Dire forecasts from Samsung Electronics Co Ltd and Advanced Micro Devices Inc sent chip-related shares lower on Friday, sparking fears that a slump in demand for semiconductors could be much worse than expected, reports Reuters.

AMD, Nvidia Corp, Intel Corp, Qualcomm Inc and Micron Technology Inc were down between 1.2 per cent and 6.0 per cent, weighing on smaller peers such as Marvell Technology Inc and Applied Materials Inc.

Samsung, the world's top maker of memory chips, smartphones and televisions, is a bellwether for global consumer demand and its disappointing preliminary results add to a flurry of earnings downgrades and gloomy forecasts.

The chip sector has been grappling with weak demand, spurred by decades-high inflation, rising interest rates, geopolitical tensions and pandemic-related lockdowns in China, hitting the PC and smartphone market as businesses and consumers rein in expenses.

Nearly a dozen analysts cut their price targets on AMD's shares by as much as $50 after the U.S.-based chipmaker slashed its third-quarter revenue outlook by about a billion dollars. "We believe AMD's warning will have the most negative read-across for PC peer Intel, but also somewhat for Nvidia and related memory and data center peers," BofA Securities analyst Vivek Arya said.

Memory chip buyers such as smartphone and PC makers are holding off on new purchases and using up existing inventory, leading to lower shipments and ushering in an industry downcycle.