TECH STOCKS: Chips Lead Retreat In Tech Sector

By Benjamin Pimentel

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

The sector also took a hit as shares of Zoran Corp. (ZRAN) plunged more than 12%. The chip maker, which issued a disappointing outlook, was downgraded to hold from buy by Lazard Capital.

The Philadelphia Semiconductor Index (SOX) fell 2.5%, while the Nasdaq Composite Index (RIXF) sank 1.2% to 2,116. The Morgan Stanley High Tech 35 Index (MSH) was off 1.6%.

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 wrote in a research note.

TI gained a fraction to close at $23.80.

The 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.

Other chip makers were solidly in negative territory, including Advanced Micro Devices (AMD), shares of which traded down about 5%, and Nvidia Corp. (NVDA), down 3.4%.

Earlier in the day, a bright spot came from IAC/InterActive Corp (IACI) shares of which advanced after the Internet company swung to a third-quarter profit. But the company's stock ended the session down a fraction.