Chip stocks have taken a tumble this week after a bearish report from a team of analysts who say “now is the time” to cash in on profits in the high-flying industry. Shares of San Jose, Calif.-based chipmaker Western Digital Corp. (WDC) are trading down nearly 7% Wednesday after Morgan Stanley lowered its rating to equal weight, citing lower flash memory prices for NAND chips and weak earnings growth in 2018.

At $86.33, WDC reflects an approximate 27.1% gain year-to-date (YTD) versus the S&P 500’s 16.2% increase over the same period. (See also: Western Digital Undervalued, Apple’s ‘Tantrum’ Shows: BTIG.)

Morgan Stanley’s Shawn Kim also reduced his rating on Taiwan Semiconductor (TSM) and Samsung Electronics down from overweight to equal weight, indicating that prices of NAND flash chips are peaking.

DRAM Peak Predicted

“We think now is the time to reduce exposure to NAND [flash memory] and Asian semiconductor names as the industry has benefited from sizeable demand tailwinds and unprecedented pricing power, which we see reversing soon,” wrote Kim. The analyst suggested that another positive re-rating of memory stocks seems unlikely over the next 12 months considering the firm’s view that the industry “will not grow earnings materially in 2018.” Based on analysis of previous memory cycles, Kim said investors should sell chip stocks three to six months before a price peak, noting that flash memory chip prices are already falling while DRAM memory will top out in mid-2018.

As for Micron Technology Inc. (MU), the analyst urged investors not to worry about the stock, instead lifting his price target based on an on upbeat outlook for the company’s DRAM business. With a 12-month target of $55, Morgan Stanley expects Boise, Idaho-based Micron stock to gain another 14% after surging 118.9% so far this year. (See also: Micron Soars to 16-Year High on Samsung News.)

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