For the fourth time in just over two weeks, ARM Holdings PLC (NASDAQ: ARMH) has been downgraded. London-based Numis Group downgraded ARM Holdings, which also trades on the London exchange, to Hold from Buy but lifted the target price to 820p from 750p. In its report, the firm cites the 85% rally in the stock from the lows in July last year. ARM should report a solid fourth quarter, capping a year of demonstrating its opportunities to become pervasive across the semiconductor market over the long term. This should also provide opportunities to extend into new market segments to remain strong, but now look priced-in.

Intel Corp. (NASDAQ: INTC) reported earnings two weeks ago and the market was not impressed. The processor and chip giant reported adjusted earnings $0.51 per share ($0.48 EPS net) and $13.5 billion in sales. Thomson Reuters had estimates of $0.45 EPS and $13.53 billion in sales. For the coming quarter, Intel sees revenues of $12.7 billion, with its usual plus-or-minus $500 range on it. Thomson Reuters has the coming quarterly earnings report showing a consensus of about $12.9 billion in revenue.

Advanced Micro Devices Inc. (NYSE: AMD) reported last week, and the analysts at Canaccord Genuity were not impressed. They reiterate a Hold rating on AMD following its in-line revenue results and soft top-line outlook. We expect weak PC demand and tough competition from Intel and Nvidia Corp. (NASDAQ: NVDA) to constrain stock appreciation as the company attempts to recover some of its lost GPU and MPU share.

When UBS A.G. (NYSE: UBS) downgraded ARM Holding last week, it cited peak multiples of earnings, or in other words, it was a valuation downgrade, just like Numis Group. UBS actually did raise its target to 900p in the U.K. from 750p, but that implies less than 10% upside with an 840p price in London. UBS also raised earnings expectations, based on higher royalties in the next four years, but a valuation peak call is what it is.

The issue for investors becomes more complex. If you want to stay invested in the growing sector that is driven by smartphone and tablet sales, should you be rotating to names that are not hitting 52 week highs?

One name that continues to top bulge bracket buy lists is Qualcomm Inc. (NASDAQ: QCOM). Qualcomm designs, develops, manufactures and markets digital telecommunications products and services. The very heart and soul of the smartphone. The Thomson/First Call street consensus target is $74.50.

Investors may also want to look at Nvidia, which provides graphics chips for use in smartphones, personal computers (PC), tablets and professional workstations markets worldwide. The Thomson/First call estimate is $15.

When Wall St. firms start to make valuation downgrades on top-performing names, it may be a smart move to sell at the highs and rotate to stocks priced lower. Investors looking for broad semiconductor sector diversification and less volatility may want to consider buying the iShares PHLX SOX Semiconductor Sector (NASDAQ: SOXX) ETF.

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