The chip giant’s shares are off four percent, dragging on the Nasdaq Composite and raising some questions about the tech sector generally. This bout of pessimism is probably a bit overdone and reflects more what’s happened in the past few months than what happened yesterday.

Tech shares have been on a strong run, with the S&P 500 information technology group up 15 percent in the last month alone. That’s a pretty quick sprint, and Intel’s merely decent news wasn’t enough to sustain it.

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In a letter to Atmel yesterday–which was released today by Microchip and ON Semi–the two companies say they were “deeply disappointed” that Atmel’s board “appears unwilling to consider a transaction at this time under any circumstances.”

The letter notes that the acquisition would be led by Microchip, and financed in part by the sale of Atmel’s nonvolatile memory, RF and automotive businesses to ON Semi. The rest of the financing would come from Microchips cash position.

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In a research note, Danely says that the move reflects “a slowdown in the Chinese consumer end market and the stock’s high valuation.” Danely said that during a trip to Asia this week, almost every company he met with said they are seeing slowing Chinese consumer end market demand due to the earthquake in Szechwan province. He writes that most companies are hopeful that end demand will stabilize and improve just before the Olympics in late July and early August.

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