Is Now the Time to Buy Tech Stocks? Goldman Sachs Thinks So

TLDR

• Goldman Sachs strategists say tech valuations have dropped below the broader market for the first time in decades
• Tech has underperformed the rest of the market by a margin not seen since the early 1970s
• The sector’s PEG ratio has fallen below Consumer Discretionary, Staples, and Industrials
• Tech earnings remain strong, with 44% EPS growth expected in Q1 2026
• Goldman says current top tech companies trade at around 20x forward P/E, less than half dot-com bubble levels

Goldman Sachs strategists say the technology sector now looks cheap after one of its worst runs of underperformance in 50 years. The bank says the selloff has created a buying opportunity for investors.

Tech stocks hit record highs last October, driven by fast revenue growth and strong profits. Since then, they have fallen sharply on concerns about massive spending on artificial intelligence infrastructure.

The largest cloud computing companies have committed over $700 billion to data center buildouts. Investors are questioning whether the returns will justify that level of spending.

Tech has now underperformed the broader market by a margin not seen since the early 1970s. Goldman strategists, led by Peter Oppenheimer, say that gap has created a clear valuation opportunity.

The price-to-earnings-growth ratio for global information technology has fallen below the broader market. The sector’s forward price-to-earnings ratio now sits below Consumer Discretionary, Consumer Staples, and Industrials.

Goldman compared the current valuation drop to the trough seen after the dot-com bubble burst between 2003 and 2005. The bank says this does not mean a repeat of that crash is coming.

Why Goldman Is Not Calling This a Bubble

The leading tech companies today — including Nvidia, Apple, Alphabet, Microsoft, and Amazon — trade at a combined two-year forward price-to-earnings ratio of around 20x. At the peak of the dot-com bubble in 2000, the top tech stocks traded at roughly 52x.

That difference is central to Goldman’s argument. The bank says current valuations do not reflect the kind of speculation that drove the bubble more than two decades ago.

Earnings have also held up through the selloff. Analysts expect the information technology sector to grow earnings per share by 44% in the first quarter of 2026.

That figure accounts for 87% of total S&P 500 earnings growth in the period. Goldman estimates AI infrastructure investment alone will contribute around 40% of S&P 500 earnings growth this year.

What Is Driving the Rotation Away From Tech

Investors have moved into what Goldman calls “old economy” stocks. A Goldman basket of capital-intensive stocks, including utilities and manufacturing companies, has gained 11% year-to-date.

These sectors have been re-rated as investors expect more infrastructure spending to support energy supply and data center buildouts. That shift has pulled money away from tech.

Goldman also notes that tech cash flows are less sensitive to economic growth. The bank says that makes the sector more defensive if the conflict in the Middle East continues to weigh on global markets.

The S&P 500 has also lagged other major global markets since the start of 2025, reversing a trend that had held since the financial crisis.

Goldman’s Oppenheimer said return on equity in the tech sector has remained high, and earnings revisions have stayed positive through the downturn.

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