Morgan Stanley recommends investors take profits from Asian tech stocks due to trade-related risks, high valuations, and limited earnings growth potential. The firm warns that if tariffs on computer chips increase and trade tensions escalate, the sector could see a short-term decline of around 20%. Investors are advised to reduce exposure to tech stocks and hedge industry risks, as current conditions result in unfavorable short-term risk-reward scenarios.

Despite global enthusiasm for AI boosting Asian tech stocks, with an index tracking regional semiconductor stocks rising over 65% since late 2022, potential geopolitical issues loom. U.S. President Trump has indicated plans to impose additional tariffs on foreign-made computer chips and semiconductors. Analysts recall a similar geopolitical dispute in 2018 that negatively impacted stock prices in the sector.