(Bloomberg) -- Alphabet Inc. fell 3.3% on Monday, after UBS Group AG downgraded the Google parent to neutral from buy in the latest example of waning enthusiasm toward megacaps among Wall Street analysts.

Major technology and internet stocks have powered the market higher this year, but the scale of the move, along with concerns over valuation, have prompted some analysts to question whether the rally has much left to run, and what the next drivers of growth could be. Stocks fell broadly on Monday as investors also debated whether the Federal Reserve will cut rates this year.

“It’s difficult to see upside to our current high-single-digit Sites growth estimates and consensus calls for acceleration to 11%,” wrote UBS analyst Lloyd Walmsley in his downgrade. He also sees risks to Alphabet’s revenue related to generative artificial intelligence, “which may take time to optimize.”

After a 34% gain in the stock this year, he added, the risk profile looks balanced.

The downgrade brings Alphabet’s consensus rating — a proxy for its ratio of buy, hold, and sell ratings — to 4.69 out of five, the lowest for the stock since December 2019. A year ago, the consensus stood at 4.96 out of five.

Wall Street analysts remain broadly positive on the stock. Nearly 90% of the firms tracked by Bloomberg have the equivalent of buy ratings on the shares, while none recommend selling. However, the number with neutral ratings has been trending up. Last month, Loop Capital downgraded Alphabet to hold, writing that its valuation “will remain volatile as the AI transition evolves.”

Alphabet is not the only megacap that analysts are distancing themselves from. The consensus rating for Apple Inc. is at its lowest since November 2020, while Microsoft Corp.’s is at levels last seen in mid-2019.

Still, megacap tech remains a popular area of the market. In addition to the growth potential from AI, the companies are seen as offering strong balance sheets, and as durable drivers of earnings and revenue.

“Despite YTD outperformance and perceived frothiness in valuation levels, we conclude that Internet Mega Caps continue to trade at reasonable levels, both as compared to historical mean/median valuation levels as well as growth-adjusted valuation levels,” writes Rohit Kulkarni, an analyst at Roth MKM. 

Kulkarni would buy the group “on any weakness” and notes that “tactical market-led softness should be viewed as an opportunity to lower cost basis ahead of AI-driven fundamental inflection in 2024 and 2025.”

(Updates to market close.)

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