Some semiconductor stocks tied to the artificial intelligence boom fell this week after missing sky-high whisper numbers. Meanwhile, chip stocks linked to mature, cyclical markets rallied amid improving outlooks.
Arm Holdings and Astera Labs both officially delivered beat-and-raise reports for the March quarter. Arm and Astera are benefiting from the AI infrastructure spending surge. But some investors wanted even more growth from the two AI chip stocks.
Arm stock fell 2.3% on Thursday despite topping analyst estimates for the March quarter and with its guidance for the June quarter. Investors focused on its full fiscal-year sales guidance, which came up short of views.
Arm's guidance was solid but not good enough to support a higher valuation for the stock, Needham analyst Charles Shi said in a client note. He rates Arm stock as hold, or neutral.
For the current fiscal year 2025, Arm predicted sales of $3.95 billion, up 22%. But the "buy-side bogey" was over $4 billion, Shi said. Arm also forecast top-line growth of more than 20% for fiscal years 2026 and 2027.
AI Boom Called Overdone For Now
Astera Labs stock dropped 9.1% on Wednesday, despite posting a first quarter beat and guiding higher than views for the second quarter.
Astera Labs investors are concerned about a design change with Nvidia's new GB200 AI server, Barclays analyst Tom O'Malley said. Nvidia is the industry leader in graphics processing units for AI data centers and its new server design doesn't need Astera's high-speed connectors.
Astera "continues to see significant strength to their Aries business, which is highly exposed to the AI ramps at hyperscalers," O'Malley said in a client note. "The key question for many going into the (earnings) call was regarding Nvidia's architecture change to the GB200, but the company believes that hyperscalers will continue to favor having control in their AI server designs. If a majority of Nvidia GPU shipments are GB200 NVL72, we see this is a headwind."
AI semiconductor stocks also came under pressure after billionaire investor Stanley Druckenmiller revealed to CNBC on Tuesday that he reduced his stake in Nvidia earlier this year. He warned that the AI boom could be overdone in the short run.
Nvidia stock has fallen in the last three trading sessions through Thursday.
Semiconductor Stocks In Cyclical Markets Rally
Meanwhile, many semiconductor stocks with exposure to smartphones and personal computers as well as the automotive and industrial sectors have risen on reassuring guidance for a cyclical turnaround in those markets.
Companies in that camp that reported quarterly results this week include Alpha & Omega Semiconductor, Cirrus Logic, GlobalFoundries, Power Integrations and SiTime.
AOS stock soared 20.9% on Wednesday after its March-quarter report, where it returned to sales growth after five quarters of declines.
"Looking at a broader view of the overall semiconductor cycle, inventory corrections across the majority of our end markets are now approaching their conclusion, positioning us for a gradual rebound as we move forward into the rest of calendar year 2024," AOS Chief Executive Stephen Chang said on a conference call with analysts. AOS makes power chips for smartphones, PCs, home appliances, cars and other products.
Cirrus Logic Gets Apple Sales Boost
Cirrus Logic stock jumped 12.2% to 102.24 on Wednesday after the audio-chip leader crushed Wall Street's March-quarter targets and gave bullish guidance. With the move higher, it broke out of a cup-with-handle base with a buy point of 95.87, according to IBD MarketSurge charts.
Cirrus Logic got a boost from increased sales of chips for Apple iPhones in the March quarter.
Elsewhere, Power Integrations stock surged 9.2% on Wednesday following its better-than-expected first quarter report and guidance.
The maker of high-voltage integrated circuits for energy-efficient power conversion also announced a deal to acquire the assets of Odyssey Semiconductor Technologies, a developer of vertical gallium-nitride, or GaN, transistor technology.
Power Integrations reported improved sales in the consumer appliance, computer and industrial segments, but poor sales in the communications infrastructure segment.
"While management refrained from calling a bottom, they implied as much as they anticipate growing each quarter through the year," Susquehanna Financial Group analyst Christopher Rolland said in a client note.
Semiconductor Stocks: Time For SiTime To Shine
SiTIme stock rocketed 28.3% on Thursday after the maker of precision timing chips delivered a beat-and-raise report. Order activity has picked up following a period of inventory correction and weak end market demand, the company said. SiTime sees a return to sales growth in the June quarter after six quarters of declines.
However, other semiconductor stocks fared poorly. Chip stocks that fell after their March-quarter earnings reports included Allegro MicroSystems, Diodes, Microchip Technology, SkyWater Technology and Synaptics.
Allegro posted better-than-expected March-quarter results but offered an outlook for the June quarter that badly missed expectations. Allegro stock sank 5.8% on Thursday.
Diodes late Thursday missed Wall Street's targets for the first quarter and with its guidance for the second quarter.
Microchip delivered in-line results for its fiscal fourth quarter ended March 31, but it guided well below views for the current quarter. Microchip stock dropped 1.8% on Tuesday in response to its earnings report.
SkyWater stock plummeted 32.6% on Thursday on its disappointing first quarter report and guidance.
Synaptics stock pulled back late Thursday after the chipmaker beat its first quarter goals but offering an in-line sales outlook for the second quarter.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
