Intel (NASDAQ: INTC) makes computer chips for PCs and servers. So does Advanced Micro Devices (NASDAQ: AMD). Qorvo (NASDAQ: QRVO), in contrast -- the company formed from the merger of RF Micro Devices and TriQuint Semiconductor four years ago -- focuses its efforts on radio frequency solutions used in mobile devices.
Continue Reading Below
You wouldn't necessarily expect these three stocks to move in tandem, but on Thursday they did -- downward. Shares of Intel stock closed the day off 5.5% while archrival AMD lost 9.5%. Qorvo shed 9.1% by close of trading.
What's the common denominator underlying these declines? On Wednesday after close of trading, market researcher TrendForce reported a precipitous decline in the prices device makers were paying for DRAM memory products: "Contract prices of DRAM products turned downward sharply in 4Q18 by 10% [quarter over quarter]," reported TrendForce.
That's bad news for "major DRAM manufacturers," which "have tried to offset fall[s] in prices by slowing down capacity expansion in 2019," says the researcher. But the news could be broader in scope than just the computer memory industry, because it suggests "the demand outlook for PCs, servers, smartphones, and other end consumer products remains weak" -- a suggestion that Apple seemed to confirm when it issued its now-famous revenue warning last night.
It gets worse: "In 2019, the total capital expenditure for DRAM production is forecast at about $18 [billion], an annual decrease of 10%. This CAPEX is at the most conservative investment level in recent years," said TrendForce.
All of this sounds like really bad news for tech stocks. Of course, what goes down could still go back up.
TrendForce blamed the "looming trade war between China and the U.S." for declines in consumer demand for electronics -- and said trade war certainly seems to be doing a number on Apple. That being said, early last month U.S. President Donald Trump and Chinese President Xi Jinping appeared to call a halt, or at least a ceasefire, in the trade war. Details are still being hammered out, but in theory at least, the idea is for the two countries to work out a new trade agreement sometime before the end of February. If they succeed, there's still a chance that the declines in tech spending that are causing capacity cuts in DRAM factories (and elsewhere) could reverse course.
And with them, so might the declines in stock price at Intel, AMD, and Qorvo.
10 stocks we like better than IntelWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Intel wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of November 14, 2018
Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends AAPL. The Motley Fool has the following options: long January 2020 $150 calls on AAPL and short January 2020 $155 calls on AAPL. The Motley Fool has a disclosure policy.