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.
It just scored a huge deal with Apple (AAPL) for its Gemini models and cloud technology to power the next generation of the smartphone maker’s AI. Speaking of models, Gemini 3 is still being viewed as the leader in the space after surpassing OpenAI’s (OPAI.PVT) ChatGPT in terms of performance last fall.
The concerns about the search business’s profit potential in the age of artificial intelligence have quieted down amid a push into AI summaries on the platform. And YouTube remains a financial juggernaut.
Memory stocks such as Micron (MU) and Sandisk (SNDK) also continue to put in strong showings amid insatiable demand for chips, that is driving up prices.
Micron and Sandisk are up 40% and 99%, respectively, year to date.
The angst around most corners of tech stocks will likely continue in the near term, unless some of the most important names scale back capital expenditures plans for 2026 or show outsized returns from the investments made in 2025. Both are unlikely, pros says.
“The Mag 7 have become the Lag 7,” Suncoast Equity managing director Eric Lynch said on Opening Bid. “One of the reason why they’re trading off is not so much that the business momentum isn’t there, it’s over this concern over the level of capex that they are guiding ever so increasingly more. And so if we get some type of moderation in that, that’ll also be highly useful for these names. I don’t expect that in this quarter per se.”
Brian Sozzi is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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