What Happened?
Shares of semiconductor testing company FormFactor (NASDAQ:FORM) fell 3% in the morning session after the major indices continued to pull back, with technology stocks accounting for most of the market's largest decliners. A key reason for this trend is that much of the recent market gains were concentrated in the "AI trade," which includes these large technology and semiconductor companies. So this could also mean that some investors are locking in some gains ahead of more definitive feedback from the Fed.
Despite the downturn, some analysts viewed this as an opportunity to own some of the "Core AI winners." Dan Ives of Wedbush Securities commented, "In our view, the tech bull cycle will be well intact for at least another 2-3 years, given the trillions being spent on AI infrastructure/software/chips/power/apps looking ahead. This remains our tech playbook and investor roadmap." Additionally, mixed earnings reports from retailers, such as Target, have added to the market's weakness. Investors are closely monitoring these reports for insights into the broader economic health and the potential impact of new tariffs on inflation.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy FormFactor? Access our full analysis report here, it’s free.
What Is The Market Telling Us
FormFactor’s shares are very volatile and have had 27 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 8 days ago when the stock gained 4.6% on the news that the semiconductor sector rallied in intraday trading as a favorable inflation report bolstered investor hopes for a potential Federal Reserve interest rate cut. The latest Consumer Price Index (CPI) data showed a slowdown in inflation, fueling a broad market rally that pushed the S&P 500 and Nasdaq to new all-time highs. For the capital-intensive semiconductor industry, the prospect of lower interest rates is particularly welcome, as it can reduce borrowing costs for expansion and research and development. The positive macroeconomic sentiment provided a significant tailwind for the entire sector, as investors anticipate that a more accommodative monetary policy from the central bank will stimulate economic growth and demand for technology.
FormFactor is down 37% since the beginning of the year, and at $27.86 per share, it is trading 45.8% below its 52-week high of $51.41 from August 2024. Investors who bought $1,000 worth of FormFactor’s shares 5 years ago would now be looking at an investment worth $993.94.
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