Goldman Sachs Sees Major Buying Opportunity in Tech Stocks After Historic Selloff

Key Highlights

• Technology sector valuations have dipped beneath the broader market’s levels for the first time in multiple decades, according to Goldman Sachs analysts
• The sector has experienced underperformance relative to the overall market at levels unseen since the beginning of the 1970s
• The price-to-earnings-growth (PEG) ratio for tech has declined below sectors including Consumer Discretionary, Consumer Staples, and Industrials
• Despite the selloff, tech sector earnings continue showing strength, with projections of 44% EPS expansion in Q1 2026
• Major tech firms currently command approximately 20x forward P/E multiples, representing less than 40% of dot-com era valuations

Analysts at Goldman Sachs have identified the technology sector as attractively priced following one of its most significant periods of underperformance spanning five decades. The investment bank characterizes the recent decline as presenting a compelling entry point for market participants.

The technology sector reached peak valuations in October of last year, propelled by accelerating revenue expansion and robust profitability metrics. Subsequently, shares have experienced substantial declines amid investor concerns regarding the enormous capital commitments being directed toward artificial intelligence infrastructure.

Major cloud computing providers have pledged upwards of $700 billion toward constructing data center facilities. Market participants are scrutinizing whether anticipated returns can substantiate such extraordinary capital deployment.

The technology sector’s recent underperformance versus the broader equity market has reached magnitudes not witnessed since the early part of the 1970s. Analysts at Goldman, headed by Peter Oppenheimer, argue this performance divergence has generated a compelling valuation entry point.

The price-to-earnings-growth metric for the global information technology sector has descended below that of the wider market. Additionally, the sector’s forward price-to-earnings multiple now registers beneath Consumer Discretionary, Consumer Staples, and Industrial sectors.

Goldman’s analysis draws parallels between the present valuation compression and the bottom observed following the collapse of the dot-com bubble during the 2003-2005 timeframe. However, the firm emphasizes this comparison does not signal an impending repeat of that market crash.

Why Goldman Rejects Bubble Comparisons

Today’s dominant technology companies — encompassing Nvidia, Apple, Alphabet, Microsoft, and Amazon — currently command a collective two-year forward price-to-earnings multiple of approximately 20x. During the zenith of the dot-com bubble in 2000, leading technology stocks commanded valuations near 52x forward earnings.

This valuation disparity forms the foundation of Goldman’s investment thesis. The firm contends present-day multiples do not exhibit the speculative characteristics that fueled the bubble exceeding twenty years ago.

Fundamental earnings performance has demonstrated resilience throughout the market correction. Analysts project the information technology sector will deliver earnings per share growth of 44% during the first quarter of 2026.

This growth figure represents 87% of aggregate S&P 500 earnings expansion during the same timeframe. Goldman’s research suggests AI infrastructure investment independently will account for approximately 40% of S&P 500 earnings growth throughout this year.

Understanding the Shift Away From Technology

Capital has migrated toward what Goldman characterizes as “old economy” equities. A Goldman-constructed basket of capital-intensive securities, encompassing utilities and industrial manufacturing firms, has appreciated 11% on a year-to-date basis.

These traditional sectors have experienced multiple expansion as market participants anticipate increased infrastructure expenditure to facilitate energy production and data center construction. This sector rotation has redirected capital flows away from technology holdings.

Goldman further observes that technology sector cash flow generation exhibits lower sensitivity to macroeconomic growth dynamics. The bank contends this characteristic positions the sector more defensively should ongoing Middle Eastern geopolitical tensions continue pressuring international markets.

The S&P 500 has also demonstrated relative weakness compared to other primary global equity indices since early 2025, reversing a persistent trend established following the financial crisis.

Oppenheimer from Goldman noted that return on equity metrics within the technology sector have maintained elevated levels, while earnings revision trends have sustained positive momentum throughout the downturn.

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