April 7 - Technology shares appear inexpensive after an extended stretch of lagging performance, presenting what Goldman Sachs describes as a potential entry point for investors.
In a client note, Goldman said that so far this year investors have witnessed "one of the weakest periods of relative returns for technology over the past 50 years." The firm points to several developments since 2025 that have weighed on the broader sector and prompted a rotation into value-style equities.
Among the specific pressures cited are the release of the Chinese artificial intelligence model DeepSeek, large-scale capital expenditure by U.S. hyperscalers and AI-induced disruption within the software industry. Taken together, these forces have contributed to the technology group's relative underperformance versus the rest of the market.
Despite that underperformance, Goldman says growth prospects within the sector remain robust while valuations have contracted. In the U.S., the valuation premium once assigned to hyperscalers has narrowed and is now nearly equal to the premium for the remainder of the technology sector.
On a global basis, Goldman notes the information technology sector's price-to-earnings ratio is below those of consumer discretionary, consumer staples and industrials. The brokerage added that the sector's valuation, when measured against expected consensus growth, has fallen beneath that of the global aggregate market and is therefore starting to present "attractive valuation opportunities for investors."
Goldman also highlighted geopolitical tensions as an additional factor improving the sector's appeal. The bank said the war in Iran has indirectly increased attractiveness for technology stocks, arguing that technology cash flows are relatively insensitive to economic growth and that the sector may benefit from any rally in bond yields. "Given the relative insensitivity of cash flows in the technology sector to economic growth, and the benefit it would derive on any rally in bond yields, this sector might prove to be more defensive over the next few months," Goldman said.
Despite compressed valuations, the fundamentals have not deteriorated, according to the note. Goldman observed that technology earnings have remained strong. Within the S&P 500, the market consensus projects information technology earnings per share to expand by 44%, and that IT would account for 87% of the index's EPS growth in the first quarter.
Goldman further reported that earnings revisions in the sector have been more positive than for any other sector. The combination of pronounced earnings strength and weak relative price performance has created what the firm described as a record gap between market performance and underlying earnings growth.
Impacted sectors - Information technology, consumer discretionary, consumer staples, industrials, and the large cloud hyperscalers that dominate capex spending.