Investing.com -- European semiconductor stocks could face another steep selloff if global macro conditions deteriorate further, with UBS warning of up to 40% additional downside in a severe downturn scenario akin to the Global Financial Crisis (GFC) or the Dotcom crash.
The sector has already corrected 5–20% since the U.S. announced sweeping tariffs on April 2, dubbed "Liberation Day," and has fallen 40–50% from its 12-month peak.
However, UBS analysts note this decline is still in line with milder past episodes such as the 2018 trade war and COVID-19, leaving room for further declines should conditions worsen.
“There is a potential further 20-40% leg down vs. the correction experienced during the larger market shocks of the Dotcom Bubble and GFC of 70-80% peak-to-trough,” analysts led by Francois-Xavier Bouvignies wrote in a note.
This current downturn has been “largely de-rating driven,” with share prices falling more sharply than earnings forecasts—especially for semiconductor capital equipment (SemiCap) names.
The analysts also challenge the notion that SemiCap stocks are more defensive than general semis, emphasizing that “both Semis and SemiCaps experience similar drawdowns” in major downcycles.
In its scenario analysis, UBS models three pathways: a tariff rollback, a mild tariff-led downturn, and a severe global recession with escalating trade tensions. The potential 20-40% downturn falls under the severe case.
Some stocks are already pricing in notable declines. For instance, Infineon (OTC:IFNNY) Technologies (ETR:IFXGn) and NXP (NASDAQ:NXPI) are factoring in 50–60% of UBS’s mild downturn assumptions, while ASML (AS:ASML) reflects just 30%.
In contrast, several companies could see their earnings turn negative due to depressed baselines and elevated interest burdens. These firms, such as Siltronic and ams-OSRAM, “could see some of the largest % declines,” analysts said.
Amid the current volatility, the analysts highlight analog chipmakers as the best positioned group.
They argue that analog names benefit from cycle rebound potential after prolonged inventory correction, distressed valuations, and possible market share gains in China due to U.S. tariffs.
“Analog looks best positioned in most scenarios,” the note states.