Scientists at IBM’s (IBM) Almaden research center have built the biggest artificial brain ever–a cell-by-cell simulation of the human visual cortex: 1.6 billion virtual neurons connected by 9 trillion synapses. This computer simulation, as large as a cat’s brain, blows away the previous record–a simulated rat’s brain with 55 million neurons–built by the same team two years ago.

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Bank of America/Merrill Lynch (BAC) chip analyst Sumit Dhanda this morning turned cautious on semiconductor stocks, downgrading a slew of stocks; his colleague Daniel Heyler made a comparable on the foundries, lower ratings on a number of stocks.

“We are downgrading our view on the sector given unfavorable indications from our cyclical framework,” he writes. “In particular, our industry model suggests that following a period of rapid replenishment of inventory and normalization of semi shipments to true consumption levels, inventories in the supply chain are approaching a level suggesting a modest overshoot versus equilibrium levels. While we see limited risk to near-term estimates, we think the longer this persists the great the risk of a correction in the supply chain. Barring a sharp upturn in the global economies, this, in our view, renders the risk reward associated with ownership of chip stocks unattractive.”

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It took a mediator–and a trip to Maui–to break the biggest logjam in landmark settlement talks between Intel (INTC) and Advanced Micro Devices (AMD). Before arriving at the agreement that ended years of acrimony and legal wrangling between the world’s largest makers of computer chips, representatives of each needed to answer one fundamental question: How much money would change hands?

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On Monday, researchers will release a twice-yearly list of the 500 biggest computers in the world. The latest rankings should provide some new clues about high tech’s relentless speed race, and how it’s being funded.

National labs and other research institutions buy these supercomputers to handle huge number-crunching tasks, like modeling weather patterns, nuclear explosions and aircraft designs. They rely heavily on advances from the semiconductor industry, since each system uses thousands of microprocessor chips–typically supplied by Intel, Advanced Micro Devices (AMD) and IBM (IBM).

Rankings on the so-called Top500 list are determined by performing a set of mathematical calculations known as Linpack that indicate how fast a system is.

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Roth Capital Partners analyst Arnab Chanda this morning lowered his rating on several chip stocks to “Hold” from “Buy,” citing the risk of a modest inventory build given high projected margins and growth at Intel (INTC), Marvell (MRVL), Nvidia (NVDA) and others.

“Overall, we’re getting the sense that lead times in the semi industry have gone up a lot. There may be orders that are ‘phantom,’ or double-orders,” Chanda told me in a phone conversation this morning.

“Second, the PC end markets are probably flat year over year, but look at Intel’s [projected Q4 revenue] growth of 23 percent, Marvell’s 50 percent, Nvidia’s 80 percent–that just seems like there’s some “exuberance” embedded in that,” says Chanda.

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Broadcom (BRCM) shares are down sharply in late trading after the chip maker posted Q3 earnings.

Note: Broadcom has the confusing habit of reporting only GAAP profits, while the Street tracks non-GAAP results. This made it look like the company suffered a huge earnings miss in the quarter, although this turns out not to be the case. Read on.

For the quarter, the company reported revenue of $1.254 billion, up 20.6 percent from the second quarter, down 3.4 percent from a year ago, and ahead of the Street at $1.16 billion.

GAAP EPS was 16 cents a share, which a Broadcom spokesman notes is above the Street at 11 cents. On a non-GAAP basis–a number not in the release–the company earned 40 cents, beating the Street consensus at 33 cents.

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Comments by Advanced Micro Devices (AMD) yesterday apparently have triggered worries on the Street that the PC manufacturers, in their zealous optimism about the prospects for Microsoft Windows 7 (MSFT), may have built too many PCs.

As I noted last night, AMD said on its post-earnings conference call with the Street that it expects a less-than-seasonal sequential increase in Q4 revenues, due in part to the “the big build we’ve seen of PCs in anticipation of the Win 7 launch.”

That has triggered concerns that the PC industry has built too much inventory–and that it could result in both reduced component consumption in Q4 and beyond, and lower pricing for memory, which has benefited in recent weeks from higher NAND and DRAM prices.

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When Paul Otellini, Intel’s (INTC) famously reserved CEO first heard the news, he got quiet. “The madder I get, the quieter I get,” he says, an important footnote for any Otellini user manual. He was hushed via press conference by Neelie Kroes, the European commissioner for competition.
“Intel used illegal anticompetitive practices to exclude essentially its only competitor and thus reduce consumer choice in the worldwide market for x86 chips,” Kroes read last May from the 542-page decision on an antitrust case charging Intel with unfair trade practices.

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After a 13-year run–marked by some dead ends–Brian Halla thinks he finally established a winning formula at National Semiconductor (NSM). So he’s stepping down.

Halla, 63, said Friday he will give up the CEO title at the chip maker on Nov. 30 to Donald Macleod, a 61-year-old Scot who has been at National since 1978 and was serving as president and chief operating officer. Halla said the appointment is fitting in view of Macleod’s contributions over the years at the company, which turns 50 this year. National is “the house that Donnie built,” Halla said.

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Despite Apple’s (AAPL) investments in developing its own custom ARM microchips in place of using Intel’s (INTC) Atom mobile processors, the company has reached out to Intel as a partner to drive the adoption of the new Light Peak specification for optical cabling. A look at Apple’s historical use of ports explains why it is doing this.

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It was a big deal when Texas Instruments (TXN) announced plans in 2003 for a massive chip factory in a suburb of Dallas, its home town. Six years later, the company is finally preparing for production there–under a strategy that has changed dramatically.

The company said Tuesday it expects to begin moving manufacturing equipment in October into the facility in Richardson known as RFAB, which has stood empty since the building’s shell was completed in 2006. Those machines will process silicon wafers that are 300 millimeters in diameter, which allows companies to churn out chips at the lowest per-unit cost.

That part fits the original plan. But instead of making advanced digital chips, RFAB will manufacture products based on analog technology–becoming the first 300-millimeter production line turning out such chips. (Others use 200-millimeter wafers).

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Global chip revenues in the third quarter are getting a big boost from inventory restocking, according to the research firm iSuppli.

According to iSuppli, in the second quarter inventories dwindled to “lean, but appropriate levels,” in a reversal of the excess inventory levels reached in 2008. In the third quarter, the research firm contends, suppliers have moved to build inventories in an attempt to reach a supply/demand balance. As a result, iSuppli contends, global chip revenues will likely by 3 percentage points above actual demand, “increasing an artificial bump in sales for the industry.”

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Hardware freaks flocked to San Francisco last week to hear Intel (INTC) talk about microprocessors, the electronic brains in PCs. But Advanced Micro Devices (AMD) made some pretty brainy claims of its own.

The smaller Silicon Valley microprocessor maker expanded its focus several years ago by buying ATI Technologies, known for the chips called graphics processing units that generate realistic-looking scenery in videogames. AMD says the high-end GPU it announced last week sports a whopping 2.15 billion transistors.

That’s more features than any chip now for sale by Intel, which prides itself on packing the most tiny components on a given square of silicon. AMD used a production process at Taiwan Semiconductor Manufacturing Co. (TSM) that creates lines of circuitry measured at 40 nanometers, or billionths of a meter; that is a bit finer than the most advanced chips currently on the market from Intel, which have features rated at 45 nanometers.

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Shares of solar panel technology maker First Solar (FSLR) are reversing course this evening, falling to $170 after briefly going as high as $189 following a clean Q2 beat. What’s spooked people are the company’s remarks on a conference call this evening about growing uncertainty in its German market.

The company has seen increasing price-cuts among competitors selling into Germany’s solar power market. Although First Solar makes panels from a thin-film semiconductor technology, it started to see trouble in the German market from manufacturers hit with a glut of polysilicon-based product and slowing of new panel projects, said CEO Mike Ahern.

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There goes the rally in contract chip makers. Shanghai, China’s Semiconductor Manufacturing International (SMI) and Taiwan’s United Microelectronics (UMC) both this morning beat profit and sales estimates for their most recent quarters and forecast above consensus, but both saw shares punished nevertheless.

SMI shares fell 21 cents, or 7.4 percent, to $2.64; UMC fell 15 cents, or 4.6 percent, to $3.15.

After a 61 percent rise in UMC stock this year and a 26 rise in SMI stock, I guess folks are selling on the news.

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