Chip Stocks, ETFs Fall on Qualcomm Antitrust Defeat, Trade

(Bloomberg) -- Tuesday’s respite in semiconductor stocks didn’t last long. Blame Qualcomm Inc.

The San Diego-based chipmaker fell as much as 11% after a U.S. District Court Judge sided with the Federal Trade Commission, saying Qualcomm’s licensing practices violated antitrust law. The ripple effect spread fast, pushing the iShares PHLX Semiconductor ETF down 2.2% nd the VanEck Vectors Semiconductor lower by 1.8%. Qualcomm is the biggest and third-biggest part of those ETFs, respectively.

Qualcomm fell below $70 after Judge Lucy Koh, in San Jose, found Qualcomm also charged high royalties for its patents, and that its key role in manufacturing modem chips for smartphones using 5G made it likely that its behavior would continue. Qualcomm’s licensing business provides the majority of the firm’s corporate profits. The decision was made public on Tuesday night.

The judge ruled against Qualcomm on nearly every measure, Sanford Bernstein analyst Stacy Rasgon said in a note to clients, despite some investors’ expectation that the judge would “soften” her stance after the firm settled the dispute with Apple.

Worsening sentiment on technology stocks Wednesday also stemmed from reports the U.S. is considering blacklisting as many as five Chinese video surveillance firms, a move that would escalate tensions and raise questions as to whether the U.S. is going after more of what are considered China’s corporate champions.

Shorting activity for SOXX has come down significantly in the past week, according to S3’s Blacklight data. Short interest as a percentage of float is hovering around 37%, its lowest level since September 2018, the data show.

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