NEW YORK ( TheStreet) -- It was solar inverter company Advanced Energy Industries ( AEIS - Get Report) turn to take a beating from investors on behalf of the solar inverter market, which has been hit hard in the past two weeks.

Advanced Energy Industries shares were down more than 10% in the early afternoon on Wednesday and trading was above the full day average volume.

The solar inverter market took a tumble last week after the world's largest inverter maker, Germany's SMA Solar, provided a cautious outlook about 2011. Power-One ( PWER) was the big loser in the bunch, down 25% in the past week before a comeback today after it announced a share buyback program.


Advanced Energy Industries is a different story as it is more closely tied to the semiconductor market than Power-One, which has transitioned more substantially to a solar inverter company. With this in mind, there were several contributing factors to the Advanced Energy Industry selloff on Wednesday, and just one potential trigger was related to its inverter business.

Advanced Energy was among a group of semiconductor stocks downgraded by Bank of America/Merrill analysts on Wednesday, seeing its rating cut to hold from buy. Investors went straight past the hold when it came to Advanced Energy's shares though, and simply sold in droves.

The AEIS selloff was definitely linked to the Bank of America/Merrill call on semiconductor stocks. However, one might ask why AEIS was down more than MKS Instruments ( MKSI - Get Report), downgraded by Bank of America from buy to sell. MKS Instruments shares were down by more than 8%, less than AEIS's 10% decline, even though the Bank of America call was less negative on AEIS shares.

This could be where the solar inverter market segment of AEIS' business came into play, though it may also be a stretch to read too much into the selloff beyond the general bear case for semiconductor stocks. On Tuesday, Sharp acquired private solar power project developer Recurrent Energy, for which AEIS has been a significant supplier of solar inverters, according to industry analysts.

Sharp has its own solar inverter equipment, and just as Sharp will be creating a captive channel for its own solar module sales with the project pipeline acquisition, it will likely be using its own solar inverters on many of the projects.

Edwin Mok, a Needham & Company analyst who remains positive on AEIS, said the company's numbers are still much more driven by the semiconductor market than solar inverter dynamics. Mok said that an argument can be made that the Street consensus earnings model for AEIS is aggressive for next year, and so Bank of America's negative call on the space could create even more anxiety based on this factor.

Mok contends that unlike the recent selling in Power-One, the AEIS can't be read as a straight bearish call on the solar inverter market. The Power-One selloff was tied to comments from German inverter giant SMA Solar about a demand lull next year in Europe. AEIS inverter sales have not been big in Europe, so those worried about a solar market slowdown in Europe wouldn't apply it to AEIS.

Additionally, concerns about lower-cost competition in the inverter space coming from China don't apply directly to AEIS, which has a focus on the higher scale, large inverter market.

--Written by Eric Rosenbaum in New York.

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