The semiconductors sector and related exchange traded funds were dragged down by disappointing results out of Intel (NasdaqGS: INTC) as the chipmaker experiences product delays and rising competition.
On Friday, the VanEck Vectors Semiconductor ETF (NYSEArca: SMH) fell 0.8% and the iShares PHLX Semiconductor ETF (NasdaqGM: SOXX) dipped 0.7%.
Bearish traders, though, capitalized on the misery with the ProShares UltraShort Semiconductors (NYSEArca: SSG), which takes the -2x or -200% daily performance of the Dow Jones U.S. Semiconductors Index, and the Direxion Daily Semiconductors Bear 3x Shares (NYSEArca: SOXS), which provides a -3x or -300% performance of the PHLX Semiconductor Select Index. On Friday, SSG jumped 3.9% and SOXS increased 2.3%.
Intel shares plunged 8.6% Friday and broke below its long-term support at the 200-day simple moving average.
While the chipmaker revealed strong second quarter earnings and revenue, analysts were concerned about rising competition from Advanced Micro Devices, CNBC reports.
“The setup is for Advanced Micro Devices to control both the architectural and process node aspects of the x86 [processor]market for years to come; a dynamic we have never seen before and structurally destructive for Intel’s business model. We reiterate our Sell rating,” Rosenblatt Securities wrote in a note on Friday, adding that Intel could lose its “near monopolistic position in CPUs that allowed for increased ASPs.”
Intel’s Production Goals
Fueling the more pessimistic outlook, Intel has struggled to maintain timely production goals on next-generation chip. The company said its next lineup will arrive in the second half of next year after hinting at the large-scale release of 10-nanometer chips for years.
Due to its less dazzling outlook, Bank of America also downgraded Intel to “neutral” from “buy” as analysts warned that the “biggest risk” remain unresolved, according to CNBC.
“The biggest risk to Intel is the year delay in shipments of its next-gen 10 [nanometer]product while rivals Taiwan Semiconductor have finally caught up and are enabling Advanced Micro Devices, Nvidia and Xilinx to potentially leapfrog,” Bank of America analysts wrote.
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