Semiconductor stocks fell sharply on Thursday as weakness in the PC market persists and Bank of America downgraded Apple (NASDAQ:AAPL) over worries on consumer demand, hitting its suppliers.
Susquehanna analyst Christopher Rolland cut his estimates and price targets on Advanced Micro Devices (NASDAQ:AMD), Intel (NASDAQ:INTC) and Nvidia (NASDAQ:NVDA), noting that channel checks point to lower notebook builds and PC shipments, now at -20% year-over-year and -17% year-over-year, respectively.
Rolland said that AMD (AMD) has continued to see market share gains on both laptop and desktop CPUs, including Chromebooks, even before the ramp of its Ryzen 7000 series. However, that's not enough for the firm to keep its estimates.
"Overall, we are cutting estimates for AMD, INTC and NVDA to reflect our new PC shipment forecast and weakening PC industry checks (and US ban on AI GPUs)," Rolland wrote in a note to clients.
However, the firm also said that the decline in iPhone estimates had implications for Apple (AAPL) suppliers, with Cirrus Logic (CRUS), Skyworks Solutions (SWKS) and Qorvo (QRVO) among the companies most likely to be impacted.
The investment firm cut its estimates for iPhone units between 5% and 10% for the next three quarters, which could negatively impact demand for the semiconductor industry anywhere between 10% and 15% on a whole.
In addition to the aforementioned suppliers, foundries like Taiwan Semiconductor (TSM) and GlobalFoundries (GFS), and semiconductor capital equipment and testing tools could also be impacted, Bank of America analyst Wamsi Mohan said.
"Semiconductor demand is influenced heavily by discretionary consumer spending across PC, phone, autos, gaming, so sluggish iPhone demand could be symptomatic of further weakness in other end-markets," Mohan wrote in a note to clients.
The three companies are seen as "high risk" category, potentially losing between 3% and 5% of sales, while companies with "moderate risk," or those only likely to see 1% to 2% downside in revenue, include Qualcomm (QCOM), and Broadcom (AVGO).
Qualcomm (QCOM) and Broadcom (AVGO) each fell slightly less than 3.5%, while diversified semiconductor vendors such as Texas Instruments (TXN), Analog Devices (ADI) and NXP Semiconductor (NXPI) declined between 2% and 3%.
Cupertino, California-based Apple (AAPL) confirmed earlier this week that it would produce some iPhone 14 units in India.