Goldman Sachs flags Big Tech buy as Iran war dents valuations

Big Tech stocks, which have come under sustained pressure in recent months, may be entering a more attractive phase for investors as valuations reset and geopolitical tensions reshape market dynamics, according to analysts at Goldman Sachs.

The sector’s sharp pullback, exacerbated by the ongoing Iran conflict, has led to a reassessment of growth expectations and pricing, with strategists arguing that the correction is creating opportunities rather than signalling deeper structural weakness.

Valuations fall below growth expectations

Technology stocks have lagged broader markets in 2026, marking one of the worst periods of relative underperformance in decades.

Analysts led by Peter Oppenheimer said the decline has pushed valuations to more compelling levels.

“…its valuation, relative to expected consensus growth, has fallen below that of the global aggregate market,” the team wrote in a research note.

The downturn follows a strong rally that drove tech stocks to record highs in October, supported by robust earnings growth and dominant competitive positions.

However, sentiment has since shifted as investors grew wary of heavy spending on artificial intelligence infrastructure, with major cloud companies committing more than [MONEY value=”700000000000″ currency=”usd” notation=”long” replace=”false”] to data centre expansion.

At the same time, a rotation into value-oriented sectors with less demanding valuations has further weighed on technology shares.

Megacap stocks look cheaper

The selloff has particularly affected the so-called Magnificent Seven, with several megacap names now trading at lower multiples.

Companies such as Meta Platforms, Microsoft, and Nvidia are currently valued at less than 20 times expected earnings over the next two years, a level that analysts say reduces concerns about an overheated sector.

Oppenheimer noted that these lower valuations contrast with previous market cycles, including the dot-com era, when leading technology firms traded at significantly higher premiums before major corrections.

The adjustment has also been reflected in market performance.

The Roundhill Magnificent Seven ETF has declined about 5% since the Iran conflict began in late February, highlighting the impact of geopolitical risks on investor sentiment.

How prolonged geopolitical disruption could support tech stocks

The ongoing conflict in the Middle East has added another layer of uncertainty, particularly through its impact on energy markets and global growth expectations.

Yet analysts argue that a prolonged disruption could ultimately support the case for technology stocks.

“The risk is that the longer the disruption to the Strait of Hormuz continues, the more this morphs into a perceived growth shock, limiting interest rate rises,” Oppenheimer wrote.

“Given the relative insensitivity of the 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.”

Lower interest rates, if they materialise, would typically support growth-oriented sectors such as technology by boosting valuations tied to future earnings.

Rotation into old-economy sectors

Meanwhile, capital has flowed into traditional industries, particularly those linked to infrastructure and energy.

Goldman Sachs’ basket of capital-intensive “HALO” stocks, including utilities and manufacturing companies, has gained about 11% so far this year, analysts said.

This shift reflects expectations of increased spending to support energy supply and the buildout of AI infrastructure.

“These factors have opened up an opportunity in the technology sector where growth rates remain strong, but valuations are now low,” Oppenheimer said.

“Tech stocks have seen strong earnings and positive earnings revisions, and return on equity has remained high,” Oppenheimer added.

While shares of companies such as Nvidia have seen modest declines in recent sessions, the broader view among strategists is that the sector’s fundamentals remain intact even as markets adjust to a more uncertain global backdrop.

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