ARM Holdings shares nose dived 8.97 per cent yesterday amid fears non-iPad tablets are vastly over supplied.
The UK chip designer supplies around 95 per cent of chips for smartphones and has already cornered the nascent tablet market.
A JP Morgan analyst this week forecast the glut of tablets – an estimated 81m this year – will far exceed demand for around 48m units.
Rod Hall also says it is “difficult to believe that many consumers will opt to go for tablets other than the iPad 2 this year.”
Chipmaker Nvidia shares were also hit last month over fears of over-supply in the tablet market, with Citigroup analysts advising caution on its stock.
ARM has been one of the few UK technology success stories, with its share price rocketing 151 per cent in the last year.
Speculation has mounted that Apple is mulling an offer for ARM, although its soaring value has made a bid appear less likely.
ARM received a boost earlier this year after Microsoft announced its designs would be used in a new, low-powered version of the Windows operating system. The tie-in will enable Microsoft to offer a full range of devices including tablet PCs, boosting the appeal of its mobile operating system. However, ARM has so far been unable to break Intel’s dominance in the laptop and desktop markets.
ARM’s shares closed at 522.5p.