Chip stocks take a broad beating after Samsung warns profit could be cut in half

Shares of semiconductor makers suffered broad weakness Friday, in the wake of a warning from South Korea-based electronics behemoth Samsung Electronics Co. that second-quarter profit could less than half what it was last year.

The PHLX Semiconductor IndexSOX, -0.88% shed 1.5%, with 28 of 30 components losing ground. The VanEck Vectors Semiconductor exchange-traded fundSMH, -0.97% slid 1.6%, with 24 of 25 components trading lower.

That outpaced the weakness in the broader stock market, in which the technology friendly Nasdaq CompositeCOMP, -0.40% lost 0.9% and the Dow Jones Industrial AverageDJIA, -0.20% gave up 190 points, or 0.7%. Read Market Snapshot.

Samsung said overnight that it expects second-quarter operating profit to decline 56% from a year ago to 6.5 trillion won ($5.6 billion), citing sluggish demand for memory chips, made worse by the ongoing U.S.-China trade war. The company is scheduled to final report results later this month.

Samsung’s stock005930, -0.76% declined 0.8% in overnight trading.

Among the chip-sector trackers’ most active components was Qualcomm’s stockQCOM, -0.35% , which slumped 1.5% in morning trading.

Qualcomm disclosed in its latest annual report that Samsung accounted for more than 10% of its revenue in 2018, 2017 and 2016. Also weighing on Qualcomm are reports that the chip maker lost in its efforts to block an antitrust ruling against it while it appeals the ruling.

Intel Corp.’s stockINTC, -1.12% fell 2.0%, and was among the Dow’s biggest decliners.

Elsewhere in the chip sector, shares of Advanced Micro Devices Inc.AMD, +0.44% lost 0.8%, Micron Technology Inc.MU, -1.14% gave up 1.7% and Nvidia Corp.NVDA, -2.06% dropped 2.7%.

Micron said in its latest annual report that it faced “intense competition” in the memory and storage markets from Samsung, while Nvidia said it was dependent on Samsung to make its semiconductor wafers.

ON Semiconductor Corp.’s stockON, +0.76% was a rare chip sector gainer, rallying 0.5%.

The chip sector has still underperformed the broader market recently, but still outperformed by a wide margin this year. The PHLX Semiconductor Index has slipped 2.0% over the past three months, but has still run up 25% year to date, while the S&P 500 indexSPX, -0.36% has gained 2.7% the past three months and advanced 19% this year.

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