What Happened?

A number of stocks fell in the morning session after the U.S. jobs report for July came in significantly weaker than expected while new widespread import tariffs were announced, sparking fears of a potential economic slowdown. 

The U.S. economy added only 73,000 jobs, far below estimates, and massive downward revisions to the prior two months painted a much weaker picture of the labor market. This has stoked recession fears, which would directly impact demand for chips used in countless products. Compounding these worries, the White House announced new tariffs, including a 20% levy on imports from Taiwan, a global hub for chip manufacturing. This dual shock of slowing domestic growth and renewed trade friction creates a challenging outlook for the highly cyclical and globally connected semiconductor industry, leading to a broad-based sell-off.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Semiconductor Manufacturing company Semtech (NASDAQ: SMTC) fell 3.2%. Is now the time to buy Semtech? Access our full analysis report here, it’s free.
• Semiconductor Manufacturing company Teradyne (NASDAQ: TER) fell 4%. Is now the time to buy Teradyne? Access our full analysis report here, it’s free.
• Memory Semiconductors company Western Digital (NASDAQ: WDC) fell 3.4%. Is now the time to buy Western Digital? Access our full analysis report here, it’s free.
• Processors and Graphics Chips company Allegro MicroSystems (NASDAQ: ALGM) fell 3.4%. Is now the time to buy Allegro MicroSystems? Access our full analysis report here, it’s free.
• Processors and Graphics Chips company Intel (NASDAQ: INTC) fell 3.1%. Is now the time to buy Intel? Access our full analysis report here, it’s free.

Zooming In On Teradyne (TER)

Teradyne’s shares are very volatile and have had 23 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 previous big move we wrote about was 2 days ago when the stock gained 21.1% on the news that the company reported better-than-expected second-quarter financial results and provided a strong third-quarter forecast, driven by robust demand for its artificial intelligence (AI) chip testing equipment. The semiconductor test equipment manufacturer posted revenue of $651.8 million and adjusted earnings of 57 cents per share, both of which topped analyst expectations. Growth was primarily fueled by its core chip testing division, as demand for System-on-a-Chip (SoC) components for AI applications surged. This strength in AI was significant enough to offset weakness in the automotive and industrial sectors. Looking ahead, Teradyne’s management provided an optimistic outlook, forecasting third-quarter revenue between $710 million and $770 million, which suggested continued momentum.

Teradyne is down 18.6% since the beginning of the year, and at $103.06 per share, it is trading 26.4% below its 52-week high of $140 from January 2025. Investors who bought $1,000 worth of Teradyne’s shares 5 years ago would now be looking at an investment worth $1,142.

Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefiting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.