2 Tech Stocks to Avoid in Case Stocks Sell Off

On the Aug. 31, 2026, episode of The Morning Filter podcast, hosts Susan Dziubinski and Morningstar Chief US Market Strategist Dave Sekera discuss why the tech sector has historically underperformed in September and talk about two 2-star rated stocks to avoid. Here is an excerpt from the show.

Why September Could Be Tough for Tech Stocks

Susan Dziubinski: Dave, let’s pivot over to three stocks to sell in September, all of which are from sectors that have historically underperformed during the month. We’ll talk tech first. Why is this one to tread lightly in September?

Dave Sekera: As you would expect if you have any kind of market selloff, the high-growth stocks, in particular tech, are the ones that usually sell off the furthest and the fastest to the downside. I think that’s why tech as a general sector would be one you probably want to tread lightly on. Having said that, we do still think there’s a number of individual AI names that we like, but certainly a sector that, if you had the market sell off, probably sells off most.

And then I’d also just note here that if we did have any kind of increase in interest rates, that’s certainly been on the radar. If the 10-year were to start hitting a five handle and go over 5%, my big concern with the tech sector is because it’s generally growth stocks, growth stocks have very long duration. The reason just because the free cash flow that really is the basis for the valuation is all further out into the future. If you start discounting that free cash flow at higher rates, that just naturally lowers the present value you’d be willing to pay for those stocks today.

Why Sandisk and Ciena Look Like Overvalued Stocks to Avoid Today

Dziubinski: You have two stocks that you’re suggesting selling in September from the tech sector. Both look way overvalued, and we’ve talked about these both before as sells: Sandisk SNDK and Ciena CIEN. Remind us why they’re sells today.

Sekera: Just taking a look at the valuations of these two stocks. Sandisk is a 2-star-rated stock, trades at almost a 50% premium over fair value, and that’s already after hitting its highs and starting to roll over. It’s a company we rate with a Very High Uncertainty, no economic moat.

Sienna, similar story, 2-star-rated stock, 40% premium, Very High Uncertainty. We do rate it with a narrow economic moat, but in this case, when I look at the two companies, I still think they’re really just generally commodity-oriented tech hardware. At some point, supply’s going to end up catching up with the demand that we have.

A lot of these companies are already redesigning or redeploying a lot of their assets to increase supply for those products that have the highest margins and have the most demand out there. A lot of these companies are already building new capacity, building new facilities. In fact, our analyst team is forecasting that 2028 will be the peak as far as earnings for all of these tech commodity-type of companies.

In this case, the upside leverage that you’ve been experiencing out to the upside, at some point that leverage is going to work the exact opposite to the downside. Once you have enough supply, prices are going to fall, margins are going to contract. I think earnings drop like a rock, and then on top of that, you’ll have multiple contraction at the same point in time.

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