Wake Up Warren! Big Tech "Cheapest" in 10 Years
A fully green day for the Magnificent 7
Stocks finished higher Tuesday, led by Mag 7. It was a re-grossing of the de-grossed, as heavily sold pockets from Q1 stood out as outperformers - with Retail, Mega-Cap Tech, and HighBeta 12M Winners all closing at the top of the leaderboard. The biggest inflection in Tech lately has been the de-rating of Mag 7 stocks, down ~11% in March, worst month since Dec’22 - due to a mix of GenAI debates, Tariff uncertainty & positioning / risk-off. The big question now is of course if the sector is a buy at more reasonable valuation levels. Let's examine.
Almost
The Magnificent 7 is almost officially in bear market territory.
Source: Koyfin
But we have of course seen worse
Much worse. 2022 was something different.
Source: Koyfin
How the have's became the have not's
Magnificent 7 have collectively returned -15% YTD. Remaining 493 stocks in the S&P 500 have been flat in 2025.
Source: Goldman
On DeepSeek arrival...unleash....
Since DeepSeek’s arrival, Mag7 stocks have been in decline.
Source: Deutsche Bank
Retail puked tech
Tech saw the biggest outflows / selling among BofA private clients over the past week and month.
Source: BofA
HFs puked too
US TMT stocks were net sold for the first time in 4 months and saw the largest net selling since Jun’24, driven by short sales outpacing long buys (4 to 1).
Source: GS Prime
1/3 of all was too much...?
Mag 7 market cap as a % of the S&P 500 market cap. Maybe that 1/3 of all market cap just was too much...
Source: Deutsche Bank
Lower premium
The premium valuation for Mag 7 stocks vs. S&P 493 is coming down. Magnificent 7 P/E currently equals 25x vs. 19x for S&P 493.
Source: Goldman
"Cheapest" in 10 years
Big Tech (big 6) vs S&P500...NTM relative P/E valuation at ~10yr lows.
Source: GS TMT specialist
NASDAQ valuation retreat
Mega cap tech stock valuations are looking a little more attractive.
Source: Bloomberg
Deliver earnings growth and the money will follow
Mega-cap share price outperformance has mirrored superior earnings growth.
Source: Goldman
Small Tech
This chart tracks the annual performance of NDXE vs NDX ratio (effectively a small vs bigger tech spread)...notable to see NDXE off to its best start to a year relative to NDX in the last 15 years..
Source: GS TMT specialist
Coming down is the hardest thing
Nvidia sales growth is expected to decelerate hard. Consensus expects NVDA sales growth will decline in 2025 and 2026. This is of course very hard for investors to deal with / get their head around.
