TECH STOCKS: Chips Lead Retreat In Tech Sector

By Benjamin Pimentel

The tech sector sank broadly into the red Tuesday, weighed down by declining prices for semiconductor shares.

A ratings upgrade of chip giant Texas Instruments (TXN) -- to outperform from market perform by FBR Capital, which cited expectations of a robust holiday season -- held out prospects for the session beginning on an upbeat note.

"It's beginning to look a lot like Christmas," FBR analyst Craig Berger said in a note.

The TI upgrade, as well as Berger's "continued positive stance" on the chip sector, rests on expectations that "holiday sell-through will be reasonably solid" for the fourth quarter, he wrote.

But in Tuesday's trading, at least, many chip investors weren't so sure.

TI was up a fraction at last check, but other chip makers were in negative territory, including Advanced Micro Devices (AMD), shares of which traded down more than 5%, and Nvidia Corp. (NVDA), down more 4%.

The sector also took a hit as shares of Zoran Corp. (ZRAN) plunged more than 11%. The chip maker, which issued a disappointing outlook, was downgraded to hold from buy by Lazard Capital.

The Philadelphia Semiconductor Index (SOX) fell 2.6%, while the Nasdaq Composite Index (RIXF) sank 1.3% to 2,114. The Morgan Stanley High Tech 35 Index (MSH) was off 1.9%.

A bright spot came from IAC/InterActive Corp (IACI) shares of which were up a fraction after the Internet company swung to a third-quarter profit.