Goldman Sachs strategists view the technology sector as offering a compelling entry point after a severe stretch of underperformance relative to the broader market. The team says the sector's recent weakness - the largest such relative drawdown since the early 1970s - has materially lowered valuation metrics and opened the door for investors who can look beyond short-term headwinds.
Strategists, including Peter Oppenheimer, attribute the sector's poor relative showing to a combination of concerns: elevated capital expenditure expectations, market unease about disruption to incumbent business models, and a wider rotation favoring value stocks. Those forces, they say, have weighed on technology while other areas of the market outperformed.
Goldman highlights that the S&P 500 itself has fallen behind other major markets since the start of 2025, a reversal of an era-long trend that had characterized the post-financial crisis period. Within that backdrop, technology now exhibits valuation metrics that the strategists view as supportive of re-engagement.
On valuation, they note the price-to-earnings-growth or PEG ratio for global Information Technology has dropped below that of the broader market. Similarly, the sector's forward price-to-earnings multiple sits beneath those for Consumer Discretionary, Consumer Staples, and Industrials. The team also points to the 'look back' PEG - a PEG calculated with trailing earnings - which has collapsed to levels implying materially weaker future earnings and is as low as the trough experienced in 2003-05.
Despite those valuation moves, earnings forecasts remain firm. Analysts expect the information technology sector to post earnings per share growth of 44% in the first quarter of 2026, and Goldman notes that this would account for 87% of total S&P 500 index EPS growth in the period. The firm further estimates that investment in AI infrastructure alone will contribute roughly 40% of S&P 500 earnings growth this year.
The strategists push back on comparisons to past market excesses. They observe that the current cohort of dominant technology companies - listed examples include Nvidia, Apple, Alphabet, Microsoft, and Amazon - trade at an aggregate two-year forward price-to-earnings multiple of around 20x. By contrast, the leading technology stocks at the peak of the dot-com era carried an aggregate multiple near 52x in 2000.
Goldman also cites the potential for geopolitical developments to influence the sector's near-term performance. The ongoing conflict in the Middle East could, in their view, act as a tailwind. Given the relative insensitivity of technology sector cash flows to broad economic growth and the potential benefit the sector might derive from any rally in bond yields, the strategists argue technology could prove relatively defensive over the next few months.
In sum, the bank's team frames the recent selloff as a valuation reset that, when combined with continued earnings strength and specific market dynamics, creates a buying case for investors prepared to weigh these factors against short-term uncertainty.