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Bernstein downgrades tech sector, looks for cheap buys

Traders work on the floor of the New York Stock Exchange in New York City.
Lucas Jackson | Reuters

AB Bernstein downgraded technology stocks to "market weight" from "modest overweight," citing potential headwinds including high valuations and trade tensions.

In the meantime, some tech names with losses as much as 50 percent over the past six months have become very attractive, said a team of tech analysts at Bernstein, who recommend picking up cheap tech stocks in 2019.

"Tech has become notably more expensive on a cap weighted basis over the last two years, the percentage of tech companies beating consensus revenues dramatically slowed over the last two quarters," Bernstein's Toni Sacconaghi and Ann Larson said in a note to clients on Tuesday.

"We also worry about the risk of an escalating trade war, which could trigger increased prices – resulting in negative demand elasticity – for consumer technology offerings as well as supply chain disruptions," they added.