Are Technology Stocks Cheap Now?

What We Do Insights Our Firm Careers Investor Relations Investor Relations Investor Relations Investor Relations Pressroom Pressroom Pressroom Pressroom Worldwide Worldwide Worldwide Worldwide Alumni Alumni Alumni Alumni Client Login Client Login What We Do Insights Our Firm Careers Investor Relations Investor Relations Investor Relations Investor Relations Pressroom Pressroom Pressroom Pressroom Worldwide Worldwide Worldwide Worldwide Alumni Alumni Alumni Alumni Client Login Client Login What We Do Insights Our Firm Careers Investor Relations Investor Relations Investor Relations Investor Relations Pressroom Pressroom Pressroom Pressroom Worldwide Worldwide Worldwide Worldwide Alumni Alumni Alumni Alumni Client Login Client Login What We Do Insights Our Firm Careers Investor Relations Investor Relations Investor Relations Investor Relations Pressroom Pressroom Pressroom Pressroom Worldwide Worldwide Worldwide Worldwide Alumni Alumni Alumni Alumni Client Login Client Login

The tech sector started 2025 and 2026 significantly underperforming the rest of the market, setting up what Goldman Sachs Research calls a “technology value opportunity." Technology stocks have fluctuated since the start of 2025, weighed down by concerns about the impact of artificial intelligence (AI) and investors questioning returns on high spending by the biggest technology companies. In addition, the market is re-rating many “old-economy” capital-heavy companies in tandem with the rising importance of physical infrastructure. At the beginning of this year, these worries culminated in a sell-off of technology stocks as fears spread about AI disrupting the business models of established software companies. The upshot, according to Peter Oppenheimer, chief global equity strategist in Goldman Sachs Research, is that the global technology sector has so far in 2026 had one of its weakest periods of relative returns in the last 50 years relative to global stocks. “The underperformance of the technology sector is starting to generate attractive opportunities for investors as its valuation, relative to expected consensus growth, has fallen below that of the global aggregate market,” Oppenheimer writes in a report dated April 7. Why have tech stocks underperformed over the last year? Several factors have contributed to the relative weakness of parts of the technology sector since 2025 and the selloff at the beginning of 2026, Oppenheimer writes. First, the massive increase in capital expenditures (capex) by the biggest US technology companies has raised concerns about how big a return they can generate on their investment. “The history of technology breakthroughs, from the steam engine to railways, PCs and the internet, is littered with examples of new technologies that attracted large sums of capital to build out underlying infrastructure which have led, ultimately, to low returns,” Oppenheimer writes. In these instances, the benefits of this investment were then enjoyed by other companies, he adds. Investors are also worried that the sums spent by some tech giants are starting to eat into cash flows and balance sheet capacity, forcing companies to raise capital or lay off workers, for example. “That said, although the debt ratios for the sector have risen (the sector was previously net cash), they remain relatively low,” Oppenheimer points out. A second reason for the underperformance of technology stocks is that investors’ attention has shifted from the potential benefits of AI to the negative impact that the technology could have on the companies that it disrupts. Investors are trying to avoid getting caught up in a repeat of previous technology disruptions, where the business models of established companies collapsed under the weight of new waves of innovation. “For the first time in a generation, investors started to question the terminal values of long duration growth companies which had previously been boosted by unwavering confidence in their ability to sustain premium growth and growth coupled with historically low discount rates,” Oppenheimer writes. Finally, the rise in tech capex demonstrates that the future growth of technology companies is increasingly dependent on their physical infrastructure. The result is that investors turned towards traditional, “old economy” industries including energy, basic resources, and industrials. Are technology stocks oversold? Investors’ concerns about technology stocks culminated in a decline for the sector at the beginning of 2026, led by software companies, whose business models seemed at high risk of being disrupted by AI. Following the decline, Oppenheimer sees a “value opportunity” in the technology sector, where the price of tech stocks globally could be undershooting the value implied by their underlying earnings growth potential. In the US, the valuation premium of the five biggest technology stocks—the extra amount that investors have to pay for projected future earnings rela

Our signature newsletter with insights and analysis from across the firm By submitting this information, you agree that the information you are providing is subject to Goldman Sachs’ privacy policy and Terms of Use. You consent to receive our newsletter via email.