Analysts at UBS said they see five warning signs for semiconductor stocks in a note on Thursday.
The investment bank said in its wide-ranging note that it believes global price momentum is “abnormally vulnerable” in the near term. They also believe we are late to outperforming entries from the tech sector, with tech sector EPS growth peaking compared to the non-tech sector.
“We see many more warning signs in the semifinals,” the company said. The first warning is some risk to earnings, with earnings 15% above trend.
Additionally, the investment bank stated that performance anticipates further significant improvements, while semiconductor stocks “only became more overbought during the TMT period.”
UBS believes semiconductor stocks are also overvalued “with relatively extreme price-to-earnings and price-to-sales ratios.”
Finally, they claim that semiconductor stocks are “abnormally decoupled from normal macroeconomic factors (discounting ISM 60 new orders even without Generation ai companies) with considerable risk from China (about 20% of sales) “.
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