Banking giant says it’s time to take profits from this booming sector

The post Banking giant says it’s time to take profits from this booming sector appeared on BitcoinEthereumNews.com.

American banking giant Wells Fargo has issued a major caution to investors, downgrading the S&P 500 Information Technology sector from ‘Overweight’ to ‘Neutral.’ The institution attributed the downgrade to mounting concerns over stretched valuations and overheated sentiment in the AI-driven tech rally. In this context, the bank’s investment arm, the Wells Fargo Investment Institute, noted that technology stocks are now trading at more than 46 times earnings, well above the S&P 500’s 29× average, leaving them vulnerable to even small earnings disappointments. Tech stocks’ valuations. Source: Wells Fargo According to the bank’s global investment strategist Douglas Beath, the move marks a reversal from the institution’s April upgrade, which had followed strong post-tariff market performance. Since then, the IT sector has surged around 60%, outperforming the broader S&P 500 by more than 25 percentage points. Beath acknowledged that artificial intelligence (AI) continues to drive robust revenue and profit growth, with leading firms reporting stronger-than-expected Q3 results and expanding capital spending on AI infrastructure. Tech sector susceptible to crash  However, he warned that expectations have risen too far, too fast. Wells Fargo now believes the sector’s lofty valuations and intense investor enthusiasm make it susceptible to underperformance, especially if earnings fall even slightly short of forecasts. The strategist also pointed to ongoing U.S.–China trade tensions and concerns about the returns on AI-related capital expenditures as additional sources of market risk. While Wells Fargo sees the recent tech pullback as potentially temporary, it advised investors to “lock in gains” by trimming their exposure to the sector. “The pullback ultimately may prove to be short-lived, but we think the sector remains vulnerable to negative surprises, potentially including even modest misses in corporate earnings reports. We favor locking in gains by trimming IT exposure back to the sector’s market weight,” he said. Analysts turn bearish…