Led by a drop in memory chip stocks like SK Hynix (SKHY) and Micron Technology (MU), selling pressure mounted on the electronic design automation sector.
Cadence Design (CDNS) and Synopsys (SNPS) fell by 9.5% and 7.8%, respectively, last Friday. Sellers fretted that China’s AI lab, Moonshot, released the Kimi K3 AI model. The Chinese model has 2.8 trillion parameters and is open weight. Users may customize the AI and use it without paying tokens.
Investors should consider Synopsys and Cadence. They offer solutions for exponential complexity that AI models cannot handle. Long-term risks, however, are worsening. AI has started automating parts of the chip design and verification process. That would justify the steep drop in SNPS stock, which peaked at $651.73 and closed at $384.27.
In the medical instruments sector, watch Intuitive Surgical. Shares lost 14.15% on July 17, closing at $345.42, compared to a peak of $603.88. In the second quarter, its revenue grew by 15% Y/Y to $2.89 billion. However, patients lost health insurance coverage after the enhanced tax credits expired.
For the year, Intuitive is forecasting da Vinci procedure growth of 13.5% to 15.5%. Non-GAAP gross profit margin is in the range of 68% to 69%. Expenses will grow by 11% to 13% (non-GAAP) this year.
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