Bernstein sees room for recovery amid valuation adjustments By Investing.com

Investing.com — Asia’s tech sector is in for a promising year in 2025, with valuations now reflecting higher bond yields and earnings trends showing early signs of recovery, Bernstein analysts said.

The sector trades at a forward price-to-earnings multiple of 21.5x and a price-to-sales multiple of 2.4x, in line with its 10-year historical averages, apparently driven by higher bond yields, Bernstein analysts said. that the sector is well positioned for upside as long as yields do not outperform 5%.

Internet, entertainment and interactive media are attractive subsectors due to their relatively cheap valuations and potential for tactical revenue support, analysts said.

While semiconductors look expensive at earnings multiples, Bernstein notes an upward trajectory for earnings revisions.Key growth drivers include AI-related demand, which is bolstering optimism for companies such as Taiwan Semiconductor Manufacturing (NYSE:) (TSMC).

Memory subs, though controversial, could see an uptick in TSMC by mid-year. SK Hynix Inc (KS:), and: Samsung Electronics Co Ltd (KS:) are recognized as top semiconductor picks powered by data center AI adoption, Bernstein analysts said.

The brokerage was less bullish on IT services and software, citing peak valuations and earnings that are unlikely to sustain growth.

Similarly, China’s Internet sector started 2025 on a weak footing, weighed down by macroeconomic drivers and geopolitical risks.However, Bernstein sees potential for improvement as pessimistic valuations normalize.

Companies such as Tencent Holdings Ltd (HK: ) and Meituan (HK: ) have advantages for their risk-reward profiles, while NetEase Inc (HK: ) also remains attractive despite softened expectations following the post-election rally.

Bernstein also discusses the broader recovery trend in the tech sector, driven by improving sentiment and a recovery in valuations. However, accumulation risks remain low relative to financials and commodities, suggesting the sector is underexposed compared to historical norms.