High interest rates are usually bad for tech stocks, and they’re now a key macroeconomic risk for “expensive” ones in particular — but two parts of the sector are in a good position, according to Bernstein. The firm’s analysts like the semiconductor and Chinese internet areas, even though tech valuations in Asia are more sensitive to bond yields than they have been in the last 10 years, they said in an Oct. 27 note. “Going forward, we still find valuation/earnings support for value tech stocks over growth or expensive tech names,” the analysts wrote. “IT services and Internet still look well positioned given reasonable valuations, low positioning and earnings recovery. Internet is the cheapest sector in terms of [price-to-sales ratio] and is the most unloved it has been in last 5 years,” they added. Semiconductors are “looking interesting,” and though they aren’t cheap, they’re finally “seeing a bottoming” in the downgrades cycle and could benefit from a relatively less crowded sector. Stock picks Bernstein’s top China internet picks are Pinduoduo and NetEase . They gave both PDD and NetEase a $120 price target, implying 10.8% upside and 12.4% upside, respectively. “Given the maturity of online penetration in key verticals, and user and time spent growth has slowed, we’ve increasingly recommended stocks where other variables (market share shifts, overseas expansion) have driven the medium-term growth outlook,” the analysts wrote. They added that they prefer video games to e-commerce. As for semiconductors, Bernstein said it likes TSMC , as it benefits from both secular and cyclical tailwinds. It predicts TSMC’s earnings growth will accelerate in 2024 and 2025, and noted its “reasonable” valuations. It gave the firm’s U.S.-listed stock a target price of $113, or 31% upside. Bernstein also updated its screen for Asian tech in light of current macroeconomic conditions. “We continue to recommend barbell of value and growth tech names with the barbell tilted towards value,” it added, referring to the strategy of picking both cheap value [do we need “cheap”] and high-growth stocks. “We would recommend avoiding expensive tech names as well as tech stocks that are unprofitable and expected to remain unprofitable.” These are some names in its screen of value Asia tech stocks: MediaTek , JD.com , Lenovo Group , Foxconn Technology and Samsung SDS. And these are some of those that showed up on its screen of high-growth Asia tech stocks: Naver , SK Hynix , AAC Technologies , Luxshare and Kakao Games. On the whole, Bernstein is relatively positive on the Asia tech sector. “It’s worth noting that historically, the Asian tech sector has shown resilience, generating an average of 9% outperformance during global recessions, indicating limited recession risk,” it said. — CNBC’s Michael Bloom contributed to this report.