What Happened?

Shares of semiconductor designer Lattice Semiconductor (NASDAQ: LSCC) fell 13.7% in the afternoon session after the company reported mixed first quarter 2025 results: Revenue and adjusted EPS in the quarter roughly met Wall Street's expectations, as did Q2 guidance for those two metrics. 

One negative was that Lattice's inventory levels increased. Management stated that the company was "monitoring the market environment, along with the broader industry, as it could have an impact on our outlook", likely referring to tariffs and overall global GDP and industrial production. Overall, this was an unexciting quarter.

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What The Market Is Telling Us

Lattice Semiconductor’s shares are very volatile and have had 29 moves greater than 5% over the last year. But moves this big are rare even for Lattice Semiconductor and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 13 days ago when the stock gained 7.4% on the news that President Trump clarified that he had no intention of removing Federal Reserve Chair Jerome Powell, a statement that helped calm markets. Earlier remarks had sparked fears of political interference in decision making at the central bank. With Trump walking back his earlier comments, investors likely felt more assured that monetary policy decisions will continue to be guided by data, not drama. That kept the Fed's word credible, and more importantly, gave investors a steadier compass to figure out where rates and the markets were headed next. 

Adding to the positive news, the president made constructive comments on US-China trade talks, noting that the tariffs imposed on China were "very high, and it won't be that high. ... No, it won't be anywhere near that high. It'll come down substantially. But it won't be zero." 

Also, a key force at the center of the stock market's massive two-day rally was the frantic behavior of short sellers covering their losses. Hedge fund short sellers recently added more bearish wagers in both single stocks and securities tied to macro developments after the whipsaw early April triggered by President Donald Trump's tariff rollout and abrupt 90-day pause, according to Goldman Sachs' prime brokerage data. The increased short position in the market created an environment prone to dramatic upswings due to this artificial buying force. A short seller borrows an asset and quickly sells it; when the security decreases in price, they buy it back more cheaply to profit from the difference.

Lattice Semiconductor is down 16.5% since the beginning of the year, and at $46.72 per share, it is trading 39.7% below its 52-week high of $77.49 from May 2024. Investors who bought $1,000 worth of Lattice Semiconductor’s shares 5 years ago would now be looking at an investment worth $2,188.

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