Tech Stocks: Cheap or Just Cheaper?

Goldman Sachs Research is posing a provocative question: Is tech cheap, now? After a dramatic sell-off, software and tech stocks have shed their significant premium over the broader market. While they still trade at an earnings premium, it’s a fraction of what it was a year ago, returning to levels seen around 2018.

Globally, the technology sector’s price-to-earnings ratio now sits below that of consumer staples and industrials. This comes as big box retailers are valued more expensively than hyperscale tech companies.

What’s particularly striking is that this diminished premium comes alongside robust earnings growth. According to Goldman Sachs, tech companies have seen the most upward earnings revisions globally in 2026. BlackRock data shows US IT sector growth expectations climbing from 31% to 43.4% year-to-date, significantly outpacing the broader US market’s 18.7%.

The only sector even approaching tech's expected earnings growth is Energy. Info Tech's composite estimate for EPS growth stands at 40%, more than double the overall index.

This divergence—rapidly rising earnings expectations coupled with falling valuation premiums—is unusual. While not investment advice, the shift suggests a potential re-evaluation of tech stock value.

Further conviction may come from insider activity. Corporate insider buying in companies tracked by the State Street Tech ETF ($XLK) has reached a 15-year high. Management teams, intimately familiar with their companies' prospects, appear to be investing heavily.

The broader market narrative is shifting, but the underlying financial metrics for tech present a compelling, if complex, picture.