Angst.
That’s the one word now confronting popular tech stocks.
“Tech angst stems from the mood in software,” Evercore ISI strategist Julian Emanuel pointed out.
“Existential concerns and momentum in other parts of the [tech] sector with a more visible path to monetizing AI — spilling into AI/Hyperscalers. Price action sets the (now cautious) narrative. AI itself faces question on adoption, leverage, circular financing, and overspending,” he added.
Long biased tech-centric investors are as defensive as they have been at any time since ChatGPT began the “AI Revolution” bull market in the fourth quarter of 2022, Emanuel wrote.
Information technology is trading at its lowest valuation premium to the S&P 500 (^GSPC) in the post-pandemic environment, according to Evercore ISI data. The price-to-earnings multiple for the “Magnificent Seven” is in line with its post-pandemic average, while the other 493 stocks in the S&P 500 trade near their all-time high valuations.
Meanwhile, the price-to-earnings growth ratio (PEG ratio) of megacap tech has declined to just 1.4 times, which matches the trough reached in 2022, Goldman Sachs strategists noted.
Read more: Are we in an AI bubble? How to protect your portfolio if your AI investments turn against you.
Goldman strategist Ben Snider explained, “investors have increasingly questioned whether earnings-based valuations are appropriate for the stocks involved in the AI capex build-out, as large capital expenditures have weighed on free cash flows. While price to earnings ratios are low, price to free cash flow multiples are very elevated relative to history, indicating the downside risk to valuations if concerns over the returns to AI investment continue to build.”
Software stocks Salesforce (CRM) and Workday (WDAY) are off to terrible starts in 2026, down 14% and 12%, respectively.
There are a few pockets of strength in tech, however. One is Alphabet (GOOGL).
Shares of the search giant are already up 5% this year and the company’s market cap has settled above $4 trillion. It’s the best-performing member of the Magnificent Seven in 2026.
For comparison, shares of AI chip darling Nvidia (NVDA) are up slightly on the year.
“I think Google could end the year with the highest market cap [in the market],” veteran trader and Thinkorswim founder Tom Sosnoff said on Yahoo Finance’s Opening Bid. Nvidia currently holds that distinction with a $4.57 trillion market cap.
But Google is making a strong case it will be the AI-centric stock to beat in 2026.
