Technology stocks are trading at their lowest relative valuation to the broader US market in eight years, narrowing a premium that has long reflected the sector’s stronger earnings growth and market leadership.
The Nasdaq 100, which includes many of the largest US technology companies, has fallen about 12% from its October record high and is now trading at below 21 times forward earnings. That leaves its valuation premium at roughly 1.7 points above the S&P 500, the smallest gap in eight years.
Nigel Green, chief executive of deVere Group, said: “Tech has historically traded at a meaningful premium to the broader market because of its superior earnings growth, balance sheet strength and global dominance. This premium has now compressed to levels we have not seen in nearly a decade.”
The valuation reset comes as global markets remain unsettled by tensions linked to the Iran conflict, which have added volatility through higher oil prices, supply concerns and renewed uncertainty over inflation. Even so, the earnings outlook for many large technology companies remains relatively firm, supported by strong cash flow, high margins and continued investment in artificial intelligence and digital infrastructure.
Earlier periods in which the Nasdaq 100’s valuation premium narrowed sharply were followed by stretches of stronger relative performance, though past patterns do not guarantee a repeat. Some strategists argue that the current decline reflects macro uncertainty more than a deterioration in the underlying business performance of major technology groups.
Green said: “The current pullback is being driven more by macro uncertainty and sentiment rather than any deterioration in the core earnings outlook of leading tech firms.”
Across Wall Street, the reduced gap between technology valuations and the broader market is drawing renewed attention to the sector, particularly as investors weigh whether short-term geopolitical risks are obscuring longer-term growth trends.
