Barclays downgraded Lumentum (LITE.US) and two other semiconductor stocks before the earnings season, and instead "increased holdings" in KLA Corporation (KLAC.US).

On the eve of the financial reporting season, Barclays PLC Sponsored ADR made important adjustments to the ratings of several semiconductor-related companies. The institution downgraded the ratings of Lumentum (LITE.US), Astera Labs (ALAB.US), and Marvell Technology, Inc. (MRVL.US) from "hold" to "hold/observe" based on the core logic that the attractiveness of these three companies has decreased compared to other stocks already in the AI race. Barclays pointed out that they have a more positive view on the investment value of KLA Corporation (KLAC.US), Coherent (COHR.US), and MACOM Technology Solutions (MTSI.US). Specifically, before this round of rating adjustments, Lumentum's stock price had already risen by 60% in the past three months, far exceeding the 5% increase of the S&P 500 during the same period. Analyst Tom O'Malley emphasized in a client report, "We are temporarily not bullish on Lumentum's rating, as its risk-return profile no longer has a clear advantage compared to its peers. Although there is potential upside from EML capacity expansion and optical transceiver customer growth, the growth catalysts are relatively limited in the current high valuation environment." The downgrade of Astera Labs rating stems from the lack of market penetration of its UALink product, as it has not established significant advantages in the broader Ethernet, ESUN, and SUE-T product system, apart from the Amazon.com, Inc. Trainium 3 project. Meanwhile, Marvell Technology, Inc. was downgraded due to its weaker-than-expected performance in the dedicated integrated circuit business, along with additional market risks in the data center business. It is worth noting that Barclays's adjustment this time is not a comprehensive bearish view on the semiconductor sector. The institution simultaneously upgraded the stock rating of semiconductor equipment leader KLA Corporation (KLAC.US) to "hold" and stated, "We are optimistic about the long-term prospects of process control and KLA's business layout in the industry-leading field. With relatively low growth thresholds outside of China, we expect the company to enter a strong growth cycle in the future."