TECH STOCKS: Chips Lead Early Retreat In Tech Sector

By Benjamin Pimentel

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

The session began on an upbeat note as Texas Instruments (TXN) scored an upgrade from FBR Capital Markets, which boosted its rating on the chip giant to outperform from market perform, citing expectations of a robust holiday season.

"It's beginning to look a lot like Christmas," analyst Craig Berger said in a note. "Our upgrade of TI, and our continued positive stance on the chip sector, are both predicated on our view that fourth quarter of 2009 holiday sell-through will be reasonably solid."

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

TI was up 1.6% at last check, but other chip makers were in negative territory, including Advanced Micro Devices (AMD), shares of which traded down 2.8%, and Nvidia Corp. (NVDA), down more 2.5%.

The sector also took a hit as shares of Zoran Corp. (ZRAN) plunged more than 9%. The chip maker, which issued a disappointing outlook, was downgraded to hold from buy by Lazard Capital.

The Philadelphia Semiconductor Index (SOX) fell 1.2%, while the Nasdaq Composite Index (RIXF) sank 0.3% to 2,135. The Morgan Stanley High Tech 35 Index (MSH) was off 0.7%.

A bright spot came from IAC/InterActive Corp (IACI) shares of which jumped 2.8% after the Internet company swung to a third-quarter profit.