What Happened?
Shares of semiconductor testing company FormFactor (NASDAQ: FORM) jumped 6.3% in the afternoon session after B. Riley upgraded its rating on the stock from Neutral to Buy and significantly raised its price target.
The firm increased its price target to $47.00 from a previous $34.00. The upgrade was based on increased confidence that FormFactor, a provider of test and measurement technologies for semiconductors, could improve its gross margins to a target level of 47% through better operations. The analyst also highlighted the company's strong position in the DRAM High Bandwidth Memory (HBM) market, which is seeing robust demand. Emerging opportunities with major chip companies were also noted as a positive factor.
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What Is The Market Telling Us
FormFactor’s shares are extremely volatile and have had 30 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 6 days ago when the stock dropped 8.6% as reports revealed tech giant Oracle is generating lower-than-expected margins in its cloud business and losing money on Nvidia chip rentals. The news caused Oracle's shares to tumble over 5% and sparked a wider tech sell-off, pulling the S&P 500 and Nasdaq down. Investors are growing concerned about the actual strength and profitability of artificial intelligence demand, which has been a primary driver of the market's recent record-breaking run. Oracle's struggles suggest that the massive capital investments required for AI, such as acquiring expensive chips, may not be translating into immediate or guaranteed profits. This has led to broader anxiety that the AI boom's financial returns might be less certain than previously anticipated, causing traders to pull back from the sector.
Compounding these worries was the ongoing U.S. government shutdown, in its second week, with no clear resolution in sight from Washington. This political uncertainty drove investors away from riskier assets and towards safe havens, a trend highlighted by gold hitting a record $4,000 per ounce for the first time.
FormFactor is down 8.4% since the beginning of the year, and at $40.53 per share, it is trading 16.8% below its 52-week high of $48.72 from October 2024. Investors who bought $1,000 worth of FormFactor’s shares 5 years ago would now be looking at an investment worth $1,370.
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