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Investors Chopping Down Chip Stocks

Semiconductor names are suffering traders' wrath.

SAN FRANCISCO -- Chipmakers can do no right.

While tech results in general have been shining bright this earnings season, the semiconductor companies are taking a drubbing.

From

Altera

(ALTR) - Get Report

to

SanDisk

(SNDK)

, chipmakers of all stripes are experiencing double-digit percentage declines in their share prices after reporting their quarterly financial results.

The carnage accelerated on Wednesday, as The

Philadelphia Stock Exchange Semiconductor Sector Index

tumbled 5% to its lowest level since mid-January.

That downturn didn't help the broader

Nasdaq

index, which had shed 2.5%, almost mirroring Friday's big selloff.

"The market kind of wants to whack the semis right now," says Mike Binger, a fund manager at Thrivent Investment management, which owns shares in various chip firms.

Macroeconomic concerns about a slowing economy are obviously hanging over the chip sector -- which is vulnerable to a slowdown in consumer and business spending on technology.

But these fears don't appear to be affecting many in the broader tech sector, where companies like

Apple

(AAPL) - Get Report

,

Seagate

(STX) - Get Report

and

Google

(GOOG) - Get Report

have seen their shares rise after releasing financial results.

And the chip selloff comes at a time when the PC market -- which accounts for 40% of semiconductor sales --

is proving to be healthier than expected. Industry research firm IDC said third-quarter PC shipments increased 15.5% year over year, and microprocessor shipments jumped 14.3%.

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Recent worries that "double-ordering" by chip customers was creating an inventory glut have been refuted by various companies.

The strong PC market gave

Intel

(INTC) - Get Report

a nice 5% pop when it kicked off earnings season for the silicon set last week with better-than-expected results. In midday trading Wednesday, however, Intel had given back practically all of the gain, with its shares trading down $1.18, or 4.4%, to $25.62.

Overall, the financial results of chipmakers have been mixed so far. But investor reaction appears to be uniformly negative, with signs of trouble percolating in practically every report.

Texas Instruments

(TXN) - Get Report

saw its shares clipped 8.5% Tuesday as investors fretted that it was losing share in the cell phone chip market.

One of the companies expected to take some of TI's market share is

Broadcom

. Yet Broadcom's stock is trading down 21%, or $9.11, at $32.95 Wednesday because of

the increase research and development expenses it's incurring to break into the cell phone market.

On the other hand,

ST Microelectronics

, another chipmaker stealing some of TI's lunch, is one of the rare chip companies that's up, with share gaining 4% to $17.06 Wednesday.

RF Micro Devices

(RFMD)

, which makes radio frequency chips for cell phones, said demand is stronger than expected; so strong that its

manufacturing operations are unable to keep up, dragging down profit margins in the current quarter. Its stock was down 11.3% at $6.40 in recent trading Wednesday.

Rather than any single problem plaguing the chip industry, a variety of company-specific issues appear to have manifested themselves during the current earnings season, according to investors.

"I think it's how some of these individual stories are playing out relative to expectations," says PNC Wealth Management's Bill Gorman.

Some companies were up sharply ahead of their reports, including Broadcom, which rose more than 20% in the past three months.

But it's not clear that the entire chip sector has been overvalued. The SOX is down 10% in the last three months.

Atlantic Trust SteinRoe's Fred Weiss says he's holding his ground on semis. Most of the chip stocks his firm owns target a broad variety of markets, he notes, providing some level of insulation against weak spots like industrials.

Rather than fleeing the entire chip sector, Thrivent's Binger says he's keeping his eyes open for company-specific opportunities.

"We're trying to look and say 'Which semis do we really like,'" says Binger.