Goldman Sachs believes technology stocks are presenting a buying opportunity after experiencing one of the worst periods in 50 years.

Investing.com - Goldman Sachs strategists say that after one of the worst stretches of relative underperformance in technology over the past half-century, valuations have become quite attractive, and point to the latest sell-off as a buying opportunity for investors willing to look past near-term concerns.

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Strategists, including Peter Oppenheimer, say the extent to which tech stocks have lagged behind other sectors of the market is the most severe seen since the early 1970s. This has been driven by a combination of factors, including intensifying concerns about capital expenditures, fears that artificial intelligence will disrupt existing business models, and a broader rotation toward value stocks.

The S&P 500 itself has also lagged other major markets since the start of 2025, reversing the trend from the post–financial-crisis era.

The Goldman team says valuations are the main reason for re-engagement. The price-to-earnings growth ratio (PEG) for the global information technology sector is now below the overall market level; and the sector’s forward P/E is lower than those of the consumer discretionary, consumer staples, and industrial sectors.

“One way to check this is to look at the PEG ratio based on past earnings. The collapse in the tech sector’s ‘backward-looking’ PEG implies that future earnings will weaken significantly, and they are at levels seen in the trough after the tech bubble burst in 2003–05,” strategists noted.

Meanwhile, earnings performance remains solid. Analysts expect that earnings per share for the information technology sector in the first quarter of 2026 will grow 44%, accounting for 87% of the total EPS growth for the S&P 500 over that period. Goldman estimates that investment in AI infrastructure alone will contribute roughly 40% of this year’s S&P 500 earnings growth.

The firm’s strategists also rebut the bubble-comparison argument. The two-year forward P/E ratio combined for the currently dominant technology companies—including Nvidia, Apple, Alphabet, Microsoft, and Amazon—totals about 20x, less than half of the roughly 52x P/E premium that tech stocks had at the peak of the 2000 internet bubble.

At the same time, ongoing conflicts in the Middle East could become a tailwind for the global technology sector. “Given the technology sector’s relative insensitivity of cash flows to economic growth, and the benefits it will receive when bond yields rise, the sector may look more defensive over the coming months,” the strategists wrote.

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