Investors are spooked by Tesla's cut to its near-term spending target and Lam Research's weaker-than-expected forecast
Micron's stock was falling Thursday morning.
Tesla just did something unusual - it cut its spending forecast for the year - and that's one thing weighing on the chip sector.
Intel's stock (INTC) was down 6.9% in Thursday morning action, while Advanced Micro Devices' stock (AMD) fell 7.8%. Micron Technology's stock (MU) was moving down about 4.3% in morning trading, while Nvidia shares (NVDA) were off 4%. Sandisk's stock (SNDK) was also off about 6.6%.
The weakness followed Tesla's (TSLA) decision to reduce its full-year capital-expenditure target from $25 billion to $20 billion. Capital expenditures are money the company is spending on assets, such as chips, that are meant to improve its value over time.
Tesla CFO Vaibhav Taneja attributed the move to "managing our capital deployment efficiently."
Whether more disciplined spending plans for this year mean problems - or warning signs - for the AI trade remains to be seen. J.P. Morgan analyst Rajat Gupta noted that Tesla's commentary from the earnings call suggested increases in spending next year and in 2028 as the company focuses on robotaxis, its Optimus humanoid robots, the Terafab chip-making venture and securing enough AI computing power.
StoneX analyst Mickey Legg took a similar view in a note to clients that the cut "seems like a deferral," as Tesla's spending should grow as it invests across its business.
Meanwhile, "underwhelming" results from semiconductor equipment maker Lam Research (LRCX) were also contributing to Thursday's declines, according to Jefferies equity analyst Jeffrey Favuzza.
The company said on its earnings call that it has near-term constraints in its supply chain, leading to a weaker-than-expected outlook for revenue in the December quarter. Chip-equipment companies are closely watched by technology-sector investors because corporate purchases of semiconductor equipment can be seen as a gauge of demand.
Lam's stock was down more than 9% Thursday morning.
-Britney Nguyen
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