Key Takeaways
- Technology sector valuations have dipped beneath broader market levels for the first time in multiple decades, according to Goldman Sachs analysts
- The sector has experienced its most significant underperformance versus the overall market since the beginning of the 1970s
- Price-to-earnings-growth metrics for tech have declined below Consumer Discretionary, Consumer Staples, and Industrial sectors
- Technology companies continue to deliver robust earnings, with analysts projecting 44% EPS expansion in Q1 2026
- Leading technology firms currently command approximately 20x forward P/E multiples, representing less than half the valuations seen during the dot-com era
Analysts at Goldman Sachs are making the case that technology stocks represent attractive value following an unprecedented period of underperformance spanning half a century. The investment bank believes the recent downturn presents a compelling entry point for market participants.
The technology sector is looking increasingly attractive for investors as valuations fall below those of the wider stock market, according to Goldman https://t.co/Gwn1wScxff
— Bloomberg (@business) April 7, 2026
Technology equities reached all-time peaks last October, propelled by accelerating revenue expansion and impressive profitability metrics. The rally reversed course as market participants grew increasingly concerned about the enormous capital allocation toward artificial intelligence infrastructure development.
Major cloud computing providers have pledged upwards of $700 billion toward data center construction and expansion. Market skepticism has emerged regarding whether investment returns will adequately compensate for such substantial capital deployment.
The technology sector’s relative performance has deteriorated to levels unseen since the early 1970s market environment. Strategists at Goldman, under the leadership of Peter Oppenheimer, argue this performance divergence has established an attractive entry point based on fundamental metrics.
Global information technology’s price-to-earnings-growth multiple has contracted below the broader equity market benchmark. Forward price-to-earnings valuations for the sector now trail Consumer Discretionary, Consumer Staples, and Industrial categories.
The firm drew parallels between today’s valuation compression and the bottom reached following the internet bubble collapse during 2003-2005. However, Goldman emphasizes this comparison doesn’t suggest history will repeat itself.
The Case Against a Technology Bubble
Today’s dominant technology enterprises — encompassing Nvidia, Apple, Alphabet, Microsoft, and Amazon — currently trade at a collective two-year forward price-to-earnings multiple near 20x. By contrast, peak dot-com bubble valuations in 2000 saw top technology stocks commanding approximately 52x earnings multiples.
This substantial valuation gap forms the cornerstone of Goldman’s investment thesis. The firm contends present-day pricing levels don’t exhibit the speculative excess that characterized the market environment over twenty years ago.
Earnings performance has remained resilient throughout the market correction. Wall Street analysts forecast information technology sector earnings per share will expand by 44% during the first quarter of 2026.
This projected growth represents 87% of aggregate S&P 500 earnings expansion for that timeframe. Goldman’s research suggests AI infrastructure investment will independently drive approximately 40% of S&P 500 earnings growth throughout the current year.
Understanding the Shift Away From Technology
Capital has rotated toward what Goldman characterizes as “old economy” equities. A proprietary Goldman index tracking capital-intensive industries, encompassing utilities and manufacturing enterprises, has advanced 11% year-to-date.
These traditional sectors have experienced multiple expansion as market participants anticipate increased infrastructure investment supporting energy distribution networks and data center development. This reallocation has resulted in capital outflows from technology holdings.
Goldman’s analysis further highlights that technology sector cash flow generation demonstrates reduced sensitivity to macroeconomic growth fluctuations. The research team suggests this characteristic positions the sector as relatively defensive should Middle Eastern geopolitical tensions continue pressuring international markets.
The S&P 500 has also trailed other primary global equity benchmarks since 2025 commenced, representing a reversal of the persistent trend established following the financial crisis.
Oppenheimer noted that return on equity metrics within the technology sector have sustained elevated levels, while earnings estimate revisions have maintained positive momentum despite the broader market weakness.
