KLA-Tencor

(KLAC) - Get 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

(AMAT) - Get Report

, which was off 2.2%;

Lam Research

(LRCX) - Get Report

, down 1% and

Advanced Energy Industries

(AEIS) - Get Report

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