Bulls And Bears Wage War In The Semiconductor Space (INTC, BRCM, ALTR, MRVL)

On April 14, 2010, widely followed stock analyst Jim Cramer said that he thought shares of Intel Corp.

could double from current levels (in the low $20 range) after the company reported very strong earnings and boosted margin guidance. The previous day, Rodman & Renshaw had initiated the stock with a Market Outperform rating. On April 27, 2010 Sterne Agee initiated INTC with a Buy rating, as well. The upgrades kept coming...On May 24, ThinkEquity set a $25 price target on the shares along with a Buy rating. The stock price during this time, however, has left investors disappointed, as INTC has fallen 5.62% between April 14 and June 16, 2010. The volatility in the shares has been accompanied by more divergent opinions from analysts across Wall Street, and it is not just limited to INTC, but rather the entire semiconductor space. On June 8, both Intel and Broadcom

were downgraded from Positive to Neutral at Susquehanna. The analyst, Chris Caso, wrote "The secular elements of our INTC thesis remain intact, but we believe estimates need to come down, and are hesitant to continue recommending the stock ahead of estimate cuts.” According to Caso, this could be the worst Q3 for notebooks since 2001. In downgrading BRCM, he cited "a broader slowdown in end-market demand." That same day, theflyonthewall.com reported that UBS had initiated coverage on the entire U.S. Semiconductor complex, saying that they were cautious near-term due to macro risks in Europe, seasonal weakness, and a potential regression to normalized trends. That did not keep the firm, however, from initiating Intel, Broadcom, Altera

, Marvell Technology

and Skyworks

with Buy ratings. A whole slew of semiconductor names got Neutral ratings at UBS. Further evidence of the war in the semiconductor space can be seen in the dramatic increases in the short interest on a number of stocks for the period ending May 28, according to NYSE and NASDAQ. Semi names Advanced Micro Devices

and Texas Instruments

saw sharp increases in their short interest. AMD's short interest was up 19% to 61.6 million shares. TXN showed a 27% increase to 27.9 million shares. Who else was on that list? Both INTC and BRCM also had significant increases in their short interest. At Intel, the shorts had increased their positions by 36% to 61.3 million, while Broadcom had a 41% increase to 15.9 million. Further upping the ante in this battleground area of the market was a

written by Avi Salzman on June 8, 2010. The title of the piece was "Intel for a Song," and the subtitle proclaimed "When shares of the world's leading chip maker get this cheap it's likely time to ignore the doubts and buy." In a

put together by David Kostin, Goldman Sachs' chief forecaster, the firm identifies INTC as the premier GARP (Growth At A Reasonable Price) stock. The entire semiconductor complex ranked second according to the metrics Goldman

used to identify "GARP" stocks. The report was released on June 1. The continued escalation in the battle between bulls and bears in the semiconductor complex was on full display when Dan Niles of Alpha One Capital Partners appeared on CNBC's post market show Fast Money in recent days. Niles message? Pick a semiconductor stock, any stock, and short it. Niles has significant Street cred as well, as he was selected multiple times for Institutional Investor magazine's "All America Equity Research Team" in the semiconductor and PC hardware/IT hardware categories. Immediately, upon hearing Niles' bearish case on Semis, Fast Money's Joe Terranova said "I will take the other side of that trade," and proceeded to outline his bullish thesis for the sector. A look at the trading activity in Marvell Technology (

) for June 14th and 15th further supports the idea that a pitched battle between bulls and bears is taking place in the Semiconductor space. On Monday, June 14, MRVL shares opened on their highs in the $18.30 range and were subsequently sold off throughout the day, closing right on their lows around $17.49. The next day, the stock was one of the top performers on the Nasdaq, gaining over 8%. Why does any of this matter? I believe that semiconductors, and Intel in particular, are a fulcrum for this market. By any sober person's estimation, the U.S. economy is in quite a bind. Unemployment remains sky high, growth concerns have placed themselves at the forefront of the investment community's collective consciousness, and deficits and out of control government spending pose a severe fiscal threat. The technology sector, which is inextricably linked to the performance of the Semi complex, is the crown jewel of the American economy. Tech, in my opinion, is our best hope for sparking growth and pulling ourselves out of this mess. The bears know that Technology stocks, and by extension Semis, are a key battleground area for control of this market. Keep them down, and everything else will follow. Furthermore, there are strong arguments to be made against the sector, but valuations are very compelling which makes their mission a difficult one - and they may be losing. The Semiconductor HOLDRs ETF

has climbed nearly 10% in the last 5 trading sessions. In the coming weeks, the battle for control of the Semiconductor sector will likely remain a key focal point in this market. Let the hedge funds and Wall Street prop desks settle this grudge match between themselves, but keep your eye on this sector for clues to which way stocks are headed in the near to medium term. Learn how to find the best

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