Semiconductor maker
Analog Devices
delivered a quarterly sales record on Tuesday. The stock tanked anyway. Management comments about the car business did it. Sales in that end market are expected to dip in the current quarter.
That revelation tanked shares of a host of other car-related stocks across the globe.
“We delivered another very strong quarter, record revenue of $3.26 billion exceeded the midpoint of guidance and represented [Analog’s] 13th consecutive quarter of sequential growth,” said CFO Prashanth Mahendra-Rajah on the company’s earnings conference call. “On a year-over-year basis, we grew 10%, led once again by all-time highs in industrial and automotive.” Car-related sales represented 24% of Analog’s sales.
It didn’t matter though. Analog (ticker: ADI) shares dropped 7.8% Wednesday, closing at $173.20, while the
S&P 500
and
Nasdaq Composite
fell 0.7% and 0.6%, respectively.
Guidance did it. Sales in the current quarter are expected to be about $3.1 billion. Wall Street was looking for a little more. And sales into industrial and automotive end markets should be down about 3% to 6% sequentially, shaving about $100 million off of total revenue.
“China definitely was the sort of the piece of new information that has developed over the more recent period,” added Mahendra-Rajah. “We’ve had three quarters of decline in China, and we’re expecting a fourth.”
Car-related weakness in China isn’t what investors want to hear. The statement might have been part of the reason
Tesla
(TSLA) dipped 1.5% and
NIO
(
NIO
) shares dropped 9.6%. Weak quarterly sales from Chinese EV maker
XPeng
(XPEV), reported Wednesday, didn’t help either.
XPeng
stock dropped 5.1%.
For the Analog quarter, “automotive [business] was impacted by a slower ramp-up in Chinese EVs,” wrote Susquehanna analyst Christopher Rolland in a Wednesday report. “We view these comments as signifying the long-awaited downtick for auto/industrial….the correction here has begun.” He still rates shares a Buy. His price target went down to $215 from $225 a share.
New cars are requiring more and more chips. And EVs require more chips than conventional cars. Both trends have been a tailwind for chip makers. A looming “correction” could take some additional air out of semiconductor stocks in coming weeks.
The news isn’t equally bad for all the chip players. “Bad for those [chip makers] exposed to autos, those exposed to AI don’t care,” says New Street Research analyst Pierre Ferragu. “Usually not the same players.”
Nvidia
(NVDA) is one that has both AI exposure and auto exposure, but auto exposure is relatively small, although it is growing. “
Nvidia
‘s data center GPU products continue to garner strong demand from both AI-focused and broader data center demand,” wrote Stifel analyst Ruben Roy in a Monday research report.
Nvidia’s data center and so-called “professional visualization” sales totaled $16.5 billion in 2022, or about 61% of total revenue. Those categories grew about 30% year over year. Auto-related sales in 2022 came in at $903 million, or about 3% of total sales. A small fraction, but auto-related sales were up about 60% year over year.
Investors, Wednesday, acted as if they realize this. Nvidia stock dropped 0.5% Wednesday. Shares of chip companies with larger auto franchises took it on the chin.
Shares of
ON Semiconductor
(ON),
NXP Semiconductors
(NXPI),
Infineon Technologies
(IFX.Germay) and
STMicroelectronics
(STM) fell 3.3%, 4.9%, 4.9% and 4.9%. Auto-related sales represent roughly 43% of 2022 sales for the quartet.
Investors in traditional auto stocks didn’t like what Analog had to say either. Shares of parts giant
Magna International
(MGA) dropped 3%.
General Motors
(GM) and
Ford Motor
(F) shares fell 3.4% and 3.3%, respectively.
Few companies heavily involved in the auto business escaped Wednesday unscathed.
Write to Al Root at allen.root@dowjones.com
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