Chips: Roth Says The Upturn Is Over; Downgrades Many Stocks

Is the big rally in chip stocks over?

Roth Capital analyst Arnab Chanda thinks so. “We believe that the upturn that began [in] November 2008 is likely coming to an end, based on numerous data points and metrics suggesting that Q2 is likely to be the last quarter of the upturn with business likely slowing” in the second half, he writes. On the other hand, he thinks we’re head for only a “mild correction.”

Chanda this morning cut his ratings on Atheros (ATHR), Broadcom (BRCM), Cavium (CAVM), Monolithic Power (MPWR), NetLogic Microsystems (NETL), Power Integrations (POWI) and Volterra (VLTR) to Hold from Buy.

He maintains Hold ratings on Intel (INTC), Marvell (MRVL), Qualcomm (QCOM) and Silicon Labs (SLAB).

He keeps his Buy rating on Nvidia (NVDA).

Chanda said that while lead times “extended considerably” in Q4 and Q1, they “are now beginning to decrease. By Q4 2010, he contends, lead times will return to the 6-8 week range, “which is likely to cause lower visibility and backlog for the semiconductor industry.”

Chanda notes that since 1994, there have been six cycles in the chip industry with a median trough-to-peak return of 148% over a median 16 month period; he notes that the most recent run lasted 17 months and returned 134%.

In today’s trading:

• ATHR is down 39 cents, or 1.1%, to $34.06.
• BRCM is off 3 cents at $32.26.
• CAVM is down 47 cents, or 1.8%, to $25.33.
• MPWR is down 23 cents, or 1.1%, to $20.28.
• NETL is down 78 cents, or 2.7%, to $27.76.
• POWI is down 46 cents, or 1.3%, to $34.57.
• VLTR is down $1.20, or 5.4%, to $21.05.