Tech stocks are now trading at their cheapest relative valuation to the broader US market in eight years, creating what the CEO of one of the world’s largest independent financial advisory and asset management organisations calls a “notable moment for investors assessing positioning for the next market cycle.”
deVere Group’s Nigel Green says the current setup in US equities highlights a significant shift in relative value within Big Tech, even as geopolitical tensions linked to the Iran conflict continue to drive volatility across global markets.
The Nasdaq 100 Index, which tracks many of the world’s largest tech companies, is down around 12% from its record high in October.
More notably, it is now priced at below 21 times forward earnings — a level that places its valuation premium at just 1.7 points above the S&P 500.
This is the narrowest valuation gap between the two indices in eight years.
Nigel Green comments: “This is a rare moment. 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.”
He continues: “Previous instances where the Nasdaq 100’s valuation premium narrowed to this extent have been followed by sustained periods of outperformance.
“Markets are, I believe, presenting a scenario that warrants close attention when assessing sector dynamics.”
History teaches us that during earlier periods when the valuation spread between tech and the broader market tightened significantly, the Nasdaq 100 went on to lead equity market gains over subsequent quarters, driven by stronger earnings momentum and capital flows.
Despite the current geopolitical backdrop, underlying fundamentals in the tech sector remain robust.
Many of the largest companies continue to deliver strong cash flows, maintain high margins, and invest aggressively in AI and tech infrastructure, reinforcing their long-term growth trajectories.
The deVere CEO notes: “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. The distinction is important.”
He adds: “Investors are seeing access to some of the most dominant and innovative companies in the world at valuations that are unusually close to the broader market. That dynamic has historically been relatively short-lived.”
The Iran conflict has introduced a layer of complexity. Oil price volatility, supply disruption risks, and shifting expectations around inflation have created cross-asset turbulence. Brent crude has surged sharply, while bond markets have rallied on expectations that longer-term inflation remains contained.
Even so, market leadership patterns are beginning to reassert themselves.
“Tech has a long-standing role as a market leader, particularly during periods where investors are looking through short-term disruption and focusing on future growth,” Nigel Green explains.
He continues: “It can be reasonably assumed that there’s increasing recognition among institutional investors that the current environment doesn’t diminish the structural drivers behind tech sector growth.
“If anything, it underscores the importance of digital infrastructure, AI and global connectivity.”
Valuations in parts of the sector have fallen to particularly notable levels.
“Some large-cap tech names are now trading at or below multiples seen during the pandemic-era market lows, despite significantly stronger earnings profiles today.
“Yet the underlying businesses are stronger, more profitable and more strategically positioned.”
This divergence is attracting attention across Wall Street, with strategists increasingly identifying Big Tech as a key area of focus within US equities.
The narrowing valuation gap suggests that investors are already beginning to rotate back into the sector, albeit cautiously.
Nigel Green concludes: “The gap between price and underlying strength in tech is now unusually wide. History shows that markets rarely leave that kind of imbalance in place for long.”