Chip Stocks Battered

SAN FRANCISCO -- The bad news in chips shifted from the future to the present Friday, as investors panicked that a feared spending slowdown has already begun.

Virtually every semiconductor stock declined in midday trading Friday, following an ugly U.S. employment report and chip giant Intel's(INTC - Cramer's Take - Stockpickr) second downgrade of the week by a Wall Street brokerage.

Shares of Intel were down 7.8%, or $1.93, at $22.74 in midday trading. Intel's stock is off nearly 14% in the first few days of 2008.

Cramer: Ignore the Semi Downgrades

JPMorgan analyst Chris Danely cut his rating on Intel from overweight to neutral Friday, citing reasons similar to Bank of America's downgrade on Wednesday.

"Our checks indicate Intel experienced a late-quarter slowdown in order rates from the PC end market which negated the upside we believed Intel experienced earlier in 4Q07," wrote JPMorgan analyst Christopher Danely in a note to investors.

Danely traced the weakness to the European PC market, where he said PC maker Acer and electronics retailer DSG have both recently lowered estimates because of disappointing order rates. And he said there is an increasing chance that PC components could be at risk of an inventory glut.

The Philadelphia Stock Exchange Semiconductor Sector Index fell 4.5% to 373, the lowest level since September 2004.

Nvidia(NVDA - Cramer's Take - Stockpickr) tumbled 7.9%, or $2.59, to $30.16, while Atheros(ATHR - Cramer's Take - Stockpickr) fell 8.1%, or $2.40, to $27.