UBS sees AI-driven stocks resilient amid tariffs

On Monday, UBS analysts issued a sector note expressing caution regarding the potential impact of tariffs on the technology sector. In their analysis, they indicated that while it’s challenging to find any companies in their coverage that would be completely shielded from the negative effects of tariff-related demand destruction, certain segments, particularly those related to artificial intelligence (AI), might remain robust.

The analysts pointed out that a weaker demand environment could compel companies to accelerate the adoption of AI technologies as a strategy to mitigate costs. This trend could benefit AI-driven companies like NVIDIA Corporation (NASDAQ:NVDA) and Broadcom Inc. (NASDAQ:AVGO), which possess strong franchises and pricing power. Texas Instruments Incorporated (NASDAQ:TXN) was also favored by UBS due to its significant manufacturing presence in the United States.

Despite a generally cautious stance on Semiconductor Equipment & Materials (SPE) stocks, UBS identified Lam Research Corporation (NASDAQ:LRCX) as an attractive investment following a recent pullback. The firm believes LRCX has been underperforming compared to its peers and now presents a compelling valuation.

UBS also conducted a screening of their coverage to assess price-to-book (P/B) multiples against a 10-year historical range. They found that stocks like KLA Corporation (NASDAQ:KLAC), Broadcom Inc., and Marvell Technology Group Ltd . (NASDAQ:MRVL) still appear expensive as their P/B multiples are above the 50% quantile relative to the S&P 500. Conversely, stocks considered very inexpensive when viewed against historical valuations include Microchip Technology Inc . (NASDAQ:MCHP), Entegris Inc. (NASDAQ:ENTG), Qorvo, Inc. (NASDAQ:QRVO), and Skyworks Solutions, Inc. (NASDAQ:SWKS).

This analysis by UBS suggests a selective approach to investing within the technology sector, with a focus on companies poised to withstand or even capitalize on the current economic headwinds due to their AI capabilities or favorable valuation metrics. For deeper insights into technology sector valuations and comprehensive financial analysis, investors can access detailed metrics and expert analysis through InvestingPro’s extensive database of Pro Research Reports, covering key metrics, growth prospects, and valuation models for informed investment decisions.

In other recent news, Qorvo Inc . reported its third-quarter fiscal year 2025 earnings, surpassing expectations with an earnings per share (EPS) of $1.61 against a forecast of $1.21, and revenue of $916 million, exceeding the anticipated $902.6 million. Despite this strong performance, the company’s outlook for fiscal year 2026 remains flat, mainly due to challenges in its Mobile business and the decision to exit lower-margin Android markets. Analysts from Citi, Mizuho (NYSE:MFG), Benchmark, and Stifel have adjusted their price targets and ratings for Qorvo, reflecting cautious views on the company’s future growth. Citi lowered its price target to $69 and maintained a Sell rating, citing a flat revenue outlook for FY2026. Mizuho also reduced its target to $85, maintaining a Neutral rating, while Stifel adjusted its target to $90 with a Hold rating. Benchmark maintained a Hold rating, acknowledging Qorvo’s diversification efforts, particularly in Aerospace and Defense, but noted the ongoing challenges in the smartphone segment. These developments highlight the mixed sentiment among analysts regarding Qorvo’s strategic shifts and market challenges.

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