- Morgan Stanley (NYSE:MS) doesn’t think chip stocks are “out of the woods” despite today’s recovery. The firm says oversupply problems look worse than those during the 2015 downturn when the Philadelphia Semiconductor Index declined 3.4% for the year.
- In a recent survey of chip distributors, the firm found that 23% of respondents said they had been double ordering, or stocking up on chips to avoid a shortage. That compares to 5% of respondents in the same position in 2015.
- Lead times (time it takes a supplier to deliver goods after an order plus the time when another order chance arises) are longer now according to 70% of respondents (32% in 2015) and 52% report inventory build ups (17% in 2015).
- Key quote, referring to both DRAM and NAND: “As we think about 2019 for memory, we would expect substantially more contraction than we saw in the 2015/16 period. For one thing, both commodities are in clear oversupply, with material undershipment relative to product in evidence for both.”
- Chip stocks on the move today include AMD (AMD +5.9%), Cirrus Logic (CRUS +4.6%), and Nvidia (NVDA +4%).
- Previously: Nanya cuts capex guidance on DRAM concerns (Oct. 16)
- Now read: Nvidia: Market Fears The Beat And... Lower?
Original article