To: Charles R who wrote (5132 ) 8/15/2000 3:06:43 PM From: Maverick Read Replies (1) | Respond to Chip Stocks Defended The semiconductor group is trading strongly this morning as Morgan Stanley Dean Witter is out this morning defending the chip stocks. The analyst sees 18-24 months left in the semiconductor cycle due to strong demand and inventories are not a problem. Furthermore, chip stocks should be helped by a seasonal pick-up in PC demand. Briefing.com continues to believe the chip and chip equipment makers are undervalued at current levels - for a Nasdaq rally, we would need to see support from this group. The group has been weak since Salomon Smith Barney (July 5) was the first to lower its rating on the chip sector to Neutral from Outperform citing decelerating unit shipments and increased capital expenditure spending which would increase supply with a potential excess capacity situation in 6-9 months...With the bad news priced in, we expect the group to perform well as the second half of 2000 should provide some upside surprises along with evidence that talk about the cycle peak is premature....The chip market no longer revolves solely around PC demand. While that market is obviously very important to the group, there are many more uses for chips than there have been in the past as everything from refrigerators to car consoles use them. Wireless devices are another huge outlet for chips and demand in the wireless sector is booming in spite of all of the recent talk of weakness in handsets. Many people are holding off on purchasing cell phones until the next generation (3G) of technology rolls out next year. Also, the lower wireless shipments are more company specific issues rather than a weakness in demand. Regardless, with all the additional uses for chips, we believe a cycle peak is premature. The sector is rallying on the news this morning with the standouts being Atmel (ATML +15.57%), Conexant Systems (CNXT +8%), Cypress Semi (CY +8%) and Silicon Storage (SSTI +7%). -- Robert J. Reid, Briefing.com
