Chip Stocks Drop as AMD, Samsung Miss Estimates on Crumbling PC Demand

© Reuters

By Senad Karaahmetovic

Chip stocks are trading lower in pre-open trading Friday after two major global chipmakers - Advanced Micro Devices (NASDAQ:AMD) and Samsung (KS:005930) Electronics (OTC:SSNLF) - reported soft results on the back of weakening PC demand.

Samsung reported an operating profit of 10.80 trillion won, much lower than the Bloomberg consensus of 12.12 trillion won and down 32% YoY. Sales came in at 76.00 trillion won, up only 2.7% YoY, and again lower than the average analyst estimate of 78.5 trillion won.

BMO analysts noted that both revenues and operating profits came in “far below” estimates. UBS analysts reiterated a Buy rating on Samsung shares despite lowered estimates.

“We expect industry supply control to remain the key debate to focus on going into next year. Despite the recent press comments on Samsung “not cutting production”, our view remains that whilst not intending to lower memory wafer starts, we believe Samsung is looking to lower wafers out by other means - such as lengthening production cycle time and longer equipment downtime for equipment – effectively achieving similar results. We further forecast 37% decline YoY in memory WFE in 2023,” the UBS analysts wrote in a note.

Separately, AMD issued preliminary results that missed the revenue consensus by over a billion. The company blamed weak results on “a significant inventory correction across the PC supply chain.”

Bank of America analysts said they expect AMD's weak preliminary results to "have the most negative read-across for PC peer INTC, but also somewhat for NVDA (consumer graphics) and related memory and data center peers."

Intel (NASDAQ:INTC) shares are down 3% in pre-market, while NVIDIA (NASDAQ:NVDA) stock price trades over 3% lower. Similarly, shares of Micron (NASDAQ:MU) and Qualcomm (NASDAQ:QCOM) are down over 1% in pre-open Friday trading.