Tech sector valuations drop 30% from October highs, narrowing premium over S&P 500 to 13% amid earnings growth.
Technology stocks have fallen 11% since early June, marking the shallowest correction in the current bull market. The pullback follows concerns over stretched valuations after an AI-driven rally, prompting profit-taking among investors.
The sector’s forward price-to-earnings ratio has declined to 22 times from 32 times in October, a 30% valuation reset. Its premium over the S&P 500 has narrowed to 13%, down from nearly 50% earlier in the bull market. Earnings estimates for tech continue to rise, outpacing broader market growth.
Major tech names, including Microsoft, Alphabet, Meta, Amazon, and Oracle, have led the retreat but remain key drivers of market performance.