Sector Snap: Semiconductors Up

The chip sector rose higher than the wider technology market Thursday, helped by a series of Banc of America upgrades on improved sector performance.

The chip sector, as measured by the Philadelphia Semiconductor Index, rose 6.94 points, or 1.9 percent, while the Nasdaq Composite Index rose 1.5 percent.

Banc of America analyst Sumit Dhanda upgraded Intel to "Buy" from "Neutral" on renewed confidence that it can improve its profit margins and gain market share.

He also saw potential share gains from new Intel products.

Intel shares rose 80 cents, or 3.7 percent, to $22.23 in afternoon trading. They have traded in the last year between $18.05 and $27.99.

Dhanda also upgraded National Semiconductor Corp. to "Neutral" from "Sell" on an improving view of the overall sector and a belief that profit margins and share buybacks can offset National's "lackluster" sales growth.

National Semiconductor shares rose $1.30, or 6.7 percent, to $20.74 in afternoon trading. They have traded between $16.21 and $29.69 in the past year.

Dhanda was upbeat on the overall chip sector, noting a health reduction in chip inventory levels. Fears about the U.S. economy are worse than the reality, he said, as flat U.S. economic growth had largely been priced into current chip prices.

In separate notes, he upgraded LSI Corp. and PMC-Sierra to "Neutral" from "Sell" on the improved chip market.

He said that negative factors have already been factored into LSI's share price, including its market-share loss and the continued drag from some of its underperforming "legacy" businesses.

LSI shares rose 36 cents, or 6.74 percent, to $5.70. They have traded in the past year between $3.75 and $10.01.

PMC-Sierra shares rose 29 cents, or 4.7 percent, to $6.44. They have traded in the past year between $4.21 and $9.83.

Dhanda also upgraded Analog Devices Inc. to "Buy" from "Neutral" on its potential for operating margin improvement, because it is likely to cut back on research and development this year.

ADI shares rose $1.54, or 5.1 percent, to $31.55. Its shares have traded in the past year between $25.15 and $41.10.