(Bloomberg) -- Semiconductor stocks are trading at bargain prices, but investors are still staying away as signs of cooling demand pile up.

Things don’t look good for the sector: Micron Technology Inc. gave a disappointing forecast, while Intel Corp. said the macroeconomic environment is weakening. Prices have dropped for memory chips, as well as for Nvidia Corp.’s graphics cards. Research firm Gartner Inc. expects PC shipments to fall 9.5% in 2022.

Chips are the worst-performing S&P 500 group this year, down almost 40%. While that’s left stocks looking cheap, most investors expect things to get worse -- especially if weakness spills over from consumer products into areas like enterprise spending and cloud computing.

“We’re in the first innings of this, and the last few could come pretty quickly and be pretty brutal,” said Rohan Kumar, a portfolio manager at Hood River Capital.

Kumar is positive on chips in the long-term, but concerns about the sector in the near-term have led him to reduce his exposure to some of the lowest levels of his decade-plus career.

The Philadelphia Stock Exchange Semiconductor Index fell 2.9% on Tuesday, on track for a sixth straight negative session. It is trading at its lowest since November 2020.

Falling demand marks a shift from 2020-2021, when the industry was struggling with a Covid-driven global supply crunch, and is also an ominous sign for the health of the broader economy, given the prevalence of chips in everything from cars to appliances, gaming and artificial intelligence.

“Semi downturns happen every 3-4 years, and we could be due for another one,” Bank of America analyst Vivek Arya wrote last week, saying that tighter monetary policy, geopolitical turmoil and consumer weakness will pressure demand into 2023. He downgraded several stocks including Texas Instruments Inc.

The rout has left the Philadelphia Stock Exchange Semiconductor Index, or SOX, trading at less than 13 times forward earnings, below its 10-year average of 16 times, and lower than the Nasdaq’s multiple.

Wall Street analysts expect profits at semiconductor companies to rise 19% in 2022, more than they expected at the start of the year, according to data compiled by Bloomberg Intelligence.

However, estimates aren’t yet reflecting the challenges ahead, and many think the consensus view will soon be slashed. B Riley Securities analyst Craig Ellis last month downgraded a number of chip and chip equipment stocks, saying consensus numbers don’t reflect uncertainty ahead for consumer or enterprise demand.

While chipmakers have gotten cheaper, estimates need to come down more for them to look attractive, according to Jordan Klein, a managing director and tech analyst at Mizuho Securities.

“We don’t have any visibility into how soft 2023 could be, and while numbers could start improving soon, I don’t want to make that bet when the Fed is getting more hawkish and we have the downside risk of a recession.”

Low valuations could limit the group’s downside potential, “but you need a bigger catalyst than stocks just looking cheap,” he said.

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(Updates with market open.)

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