UBS Identifies 5 Warning Signs for Semiconductor Chip Stocks From Investing.com

UBS analysts said in a note Thursday that they’ve discovered five warning signs for semiconductor stocks.

The investment bank said in a wide-ranging note that it believes global price momentum is “extraordinarily weak” in the near term. They also believe that technology is entering its outperformance innings late, with technology EPS growth peaking relative to non-tech.

“We see more warning signs in the semifinals,” the company said. The first warning is some return risk with returns 15% above trend.

Moreover, the investment bank said it expects significant further improvement in performance, while semiconductor stocks “have become even more overbought during the TMT period.”

UBS believes that, in extreme cases, semiconductor stocks are also overvalued in terms of P/E and price-to-sales.

Finally, they say semiconductor stocks are “unusually decoupled from normal macro drivers (60 new orders discounted by ISM even without Gen AI companies) along with significant China risk (about 20% of sales).”