Jefferies’ Top Crowded Semiconductor Short Positions: Top 10 Stocks

3. Microchip Technology Incorporated (NASDAQ:MCHP)

Number of Hedge Fund Holders In Q2 2024: 46

Shares Short % Of Outstanding: 4.99%

Microchip Technology Incorporated (NASDAQ:MCHP) is another signal controller and microcontroller manufacturer. This positions the firm favorably when it comes to capturing data center revenue. Yet, despite this, Microchip Technology Incorporated (NASDAQ:MCHP)’s shares are down 10.6% year to date, driven by a staggering 16.8% drop in the first week of August. Since the firm depends on automotive and industrial markets for a sizeable chunk of its revenue, Microchip Technology Incorporated (NASDAQ:MCHP)’s first fiscal quarter results released in August start saw its revenue sink by a whopping 45.8%. Not only are industrial and automotive markets struggling due to interest rates and inflationary-driven low spending, but Microchip Technology Incorporated (NASDAQ:MCHP) is also struggling due to an inventory buildup in the non-AI IT and data center market. Consequently, until the outlook improves, there are few tailwinds for the share price.

Aristotle Atlantic Partners mentioned Microchip Technology Incorporated (NASDAQ:MCHP) in its Q2 2024 investor letter. Here is what the firm said:

“Microchip develops, manufactures and sells smart, connected and secure embedded control solutions used by its customers for a wide variety of applications. With over 30 years of technology leadership, Microchip’s broad product portfolio is a Total System Solution for its customers that can provide a large portion of the silicon requirements in their applications. Total System Solution is a combination of hardware, software and services that helps customers increase their revenue, reduce their costs and manage their risks compared to other solutions. Microchip’s synergistic product portfolio empowers disruptive growth trends, including 5G, data centers, sustainability, Internet of Things and edge computing, advanced driver assist systems and autonomous driving, and electric vehicles in key end markets such as automotive, aerospace and defense, communications, consumer appliances, data centers and computing, and industrial.

We believe Microchip’s Total System Solution will continue to support industry share gains and margin expansion as end- market demand for industrial and Internet of Things compute needs begins to recover off current lows. Management has accelerated the drawdown of high customer inventory levels by shutting down manufacturing facilities, and current industry data as well as commentary from peers indicates that overall end demand is seeing early signs of improvement. The company has a demonstrated track record of margin expansion, and we expect to see gross margins trough at the current level and, through internal efficiencies and pricing initiatives for its Total System Solution, expand and drive increasing operating margins and higher levels of free cash flow.”