Magnificent Seven Are Cracking – Goldman Sees A Tech Value Opportunity That Hasn't Existed Since the 1970s

The consensus trade of the last decade — long Magnificent Seven, long AI capex winners — is breaking down.

For the first time in a generation, Goldman Sachs analysts highlighted that the technology sector doesn’t just look beaten up.

It now looks cheap.

In a research note published Tuesday, Goldman’s equity strategy team, led by Peter Oppenheimer, made the case that the selloff in tech giants has opened a valuation window not seen in over 50 years.

From Market Darlings To Market Doubts

After years of dominating returns, mega-cap tech stocks — NVIDIA Corporation (NASDAQ:NVDA), Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Amazon.com Inc. (NASDAQ:AMZN), Meta Platforms Inc. (NASDAQ:META), Alphabet Inc. (NASDAQ:GOOGL) and Tesla Inc. (NASDAQ:TSLA) — have entered a period of relative underperformance.

"Confidence in the so-called Magnificent 7’s ability to outperform the rest of the U.S. market forever has started to be questioned, leading to falling stock correlations and rising dispersion between the dominant companies," Oppen

Since the start of 2025 and up to the onset of the Iran war, the U.S. equity market had already begun underperforming other major regions — reversing the dominant post-financial crisis trend.

But the technology sector’s underperformance went deeper.

According to Goldman’s analysis of returns data going back to 1973, the current period ranks among the weakest on record for World Tech versus World ex-TMT — sitting at or near the bottom decile of the historical distribution.

Put simply: tech stocks have rarely underperformed the rest of the world this badly over any comparable stretch in the past half-century.

Where The Magnificent Seven Stands Today

The PEG Ratio Just Reset to Levels That Don’t Normally Exist

The clearest signal Goldman presents is the PEG ratio — a valuation measure that divides a forward price-to-earnings multiple by expected earnings growth, rewarding companies that are cheap relative to how fast they’re growing.

“The underperformance of the technology sector is also starting to generate attractive valuation opportunities for investors as its valuation, relative to expected consensus growth, has fallen below that of the global aggregate market,” Oppenheimer said.

Two things have happened simultaneously: the U.S. equity market’s PEG premium relative to the rest of the world has compressed sharply after years of decoupling under “U.S. exceptionalism.”

And the technology sector’s own PEG has now fallen below the global aggregate market — a historically rare inversion that suggests investors are being paid less to own the market than to own the sector that is growing the fastest.

What Broke The Magnificent Seven Trade: Three Structural Headwinds

Goldman’s strategists identified three forces that drove the de-rating since 2025.

First, the surge in hyperscaler capital expenditure has raised investor doubts about prospective returns.

The bank draws an explicit parallel to historical infrastructure booms — steam engines, railways, the internet — where vast capital was deployed to build foundational technology, only for the returns to accrue to companies that arrived later and built on top.

Investors began to worry the AI infrastructure wave follows the same pattern.

“The history of technology breakthroughs, from the steam engine to railways, PCs and the internet, is littered with examples of new technologies that attracted large sums of capital to build out underlying infrastructure which have led, ultimately, to low returns,” Oppenheimer said.

“The gains are then enjoyed by other companies, many of which piggyback off the original investment,” he added.

Why The Iran War May Paradoxically Favor Big Tech

Goldman introduced a final argument that may be the most counterintuitive: the ongoing war in Iran could ultimately make technology stocks more attractive, not less.

The bank’s asset allocation team has found that markets have so far priced the Iran conflict primarily as an inflation and interest rate shock — not a deep growth shock.

That has weighed on technology as a long-duration asset class.

“The risk is that the longer the disruption to the Strait of Hormuz continues, the more this morphs into a perceived growth shock, limiting interest rate rises. Given the relative insensitivity of cash flows in the technology sector to economic growth, and the benefit it would derive on any rally in bond yields, this sector might prove to be more defensive over the next few months,” the bank wrote in its report.

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