What Happened?
Shares of semiconductor designer Power Integrations (NASDAQ: POWI) fell 3.4% in the afternoon session after the stock was caught in a broader tech sell-off sparked by concerns over the profitability of the artificial intelligence sector.
The downturn followed reports that tech giant Oracle was generating lower-than-expected margins in its cloud business and losing money on renting out expensive Nvidia chips. This news caused Oracle's shares to fall and triggered wider anxiety that the massive investments required for AI might not lead to guaranteed profits. Investors grew concerned about the actual strength and financial returns of the AI boom, which had been a key driver of the market's recent performance. The uncertainty led traders to pull back from the tech sector, impacting numerous semiconductor and technology-related stocks.
The shares closed the day at $37.71, down 3.4% from previous close.
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What Is The Market Telling Us
Power Integrations’s shares are quite volatile and have had 19 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 5 months ago when the stock dropped 7.4% on the news that the company reported weak first quarter 2025 results, its inventory levels increased and revenue was only in-line with expectations. The result revealed muted sequential growth, as sales edged up just slightly from the prior quarter despite growing 15% year-over-year. Looking ahead, revenue guidance for next quarter was just in line as well. On the other hand, Power Integrations beat analysts' adjusted operating income and EPS expectations this quarter. Still, we think this was a mixed quarter. The market seemed to be hoping for more.
Power Integrations is down 37.9% since the beginning of the year, and at $37.71 per share, it is trading 44.6% below its 52-week high of $68.05 from November 2024. Investors who bought $1,000 worth of Power Integrations’s shares 5 years ago would now be looking at an investment worth $666.61.
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