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(KLAC) - Get KLA Corporation Report

was down 1.7% in late morning after

Morgan Stanley Dean Witter

downgraded it and three other major chip companies to outperform from strong buy, due to concerns about low capital spending in the semiconductor industry.

Also affected by the downgrade were

Applied Materials

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(AMAT) - Get Applied Materials Inc. Report

, which was off 2.2%;

Lam Research

(LRCX) - Get Lam Research Corporation Report

, down 1% and

Advanced Energy Industries

(AEIS) - Get Advanced Energy Industries Inc. Report

, down 1.5%. The stocks had been lower early in the session but were recovering.