Semiconductor stocks are always interesting to watch. They are considered a leading indicator for technology stocks as their presence is integral to any sort of technology boom whether its smartphones, AI, self-driving vehicles, or cryptocurrency.
Recently, the sector has come in focus for a number of reasons. For one, it's at the epicenter of the U.S.-China trade dispute. Trade in semiconductors between the two countries is a huge business with supply chains scattered all across multiple countries. Despite this uncertainty, the Semiconductors ETF (NYSE: SMH) made a new, all-time high earlier this month as companies continued to post stellar results.
Some have speculated that this is due to companies on both sides front-running the tariffs and filling inventory. Others are convinced that the price action and results are legitimate and an indication that the business cycle is beginning to turn.
Texas Instruments Earnings
Therefore, it's important to pay close attention to earnings reports from semiconductor stocks like Texas Instruments (NASDAQ: TXN). Texas Instruments reported a solid earnings figure that was in line with expectations, but it missed on revenue and gave soft fourth-quarter guidance. The stock fell more than 10% the next day.
The company blamed weak demand across nearly all segments for the decrease in revenue. Analog processor sales fell 8%, while embedded processing product sales were down 19%.The major question is whether this decrease is an industry-wide problem or specific to the company. Management gave some ominous comments indicating they may have to cut back on production and blamed the lack of demand on the trade war and customers being hesitant to spend.
Intel Earnings
One indication that Texas Instruments' miss is more of company-specific issue despite its management's protests is that Intel (NASDAQ: INTC) posted solid results. It beat earnings and sales guidance as well as raising its guidance for the next year. As a result, the stock popped more than 8%, lifting the Semiconductor Index back to all-time highs.
Like Texas Instruments, the company experienced some weakness due to tariffs, and customers unwilling to spend heavily. While Intel's traditional PC chips saw some weakness due to these issues, it was more than offset by strength in the Data Center Group. This is further confirmation that Intel is well-positioned to thrive in a post-PC world.