Analysts at UBS said they see five warning signals on semiconductor stocks in a note 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 getting late into the tech outperformance innings, with tech EPS growth peaking versus non-tech.
“We see many more warning signals on semis,” stated the firm. The first warning is some earnings risk, with earnings 15% above trend.
Furthermore, the investment bank stated that performance is anticipating significant further upgrades, while semiconductor stocks “only became more overbought during TMT period.”
UBS believes semiconductor stocks are also overvalued “with P/E and price to sales relative at extremes.
Finally, they state semiconductor stocks are “decoupled abnormally from normal macro drivers (discounting an ISM new orders of 60 even without the Gen AI companies) with some considerable China risk (c20% of sales).”