Tech Stocks Are Getting Hammered—Why Experts Say That’s ‘Healthy’

It might be hard for investors to feel upbeat while the major indexes are being hammered by tumbling tech stocks. But that’s exactly how some experts are reacting to the rout.

“I actually think what we’re seeing in markets so far this year is very healthy,” said Stephen Parker, co-head of global investment strategy at JPMorgan Private Bank, in an appearance on CNBC Wednesday.

At the index level, the year so far is looking like a wash. The S&P 500 is up less than 1% since the start of the year after a volatile January. The tech-heavy Nasdaq ended Tuesday’s session flat for the year, and was down 2% in mid-afternoon trading Wednesday.

But movements under the surface tell a clearer story of market winners and losers. Tech is the worst-performing sector in the S&P 500 so far this year, down about 4%. There, concerns that AI will disrupt the software industry have offset big stock gains for the makers of memory chips and data storage devices. 

Meanwhile, the energy and consumer staples sectors are up double digits since the start of 2026, suggesting that the shift in market leadership that analysts have been eyeing for more than a year is finally underway. 

“People have been worried about concentration risk,” said Parker, referring to persistent concerns in recent years that the tech sector had too much weight in major indexes. “Now we’re seeing a rotation. It’s about a broadening of the recovery story,” he added. 

In the past month, Bank of America clients have funneled more money into consumer staples stocks—both in absolute dollar terms and as a percent of the sector’s market capitalization—than during any other four-week stretch since 2008, when the bank began tracking flows. On the flip side, clients have been net sellers of the tech sector in four of the past five weeks.

Market watchers have been expecting the chasm between the growth of the Magnificent Seven and the rest of the economy to narrow for well over a year. But Big Tech’s growth has remained exceptional. The Mag 7 currently accounts for a record 27.8% of the S&P 500’s earnings, according to a recent Ned Davis Research report. 

But there are signs the tides could finally be turning. As of Monday, a record 90% of large-cap value companies tracked by Ned Davis had beat fourth-quarter earnings estimates. 

With growth accelerating outside of the tech sector, tech stocks have lost some of their luster. The difference between the Mag 7’s weight in the S&P 500 and its share of the index’s earnings—a shorthand for the premium investors are willing to pay for Big Tech stocks—narrowed from about 8% late last year to 6.3% today. That’s still well above the long-term average, meaning there’s room for Big Tech’s stock multiples to compress. 

The Mag 7’s earnings power and Wall Street’s taste for tech will be put to the test when Alphabet (GOOG) and Amazon (AMZN) report quarterly results on Wednesday and Thursday afternoons, respectively. Last week’s reports from Meta (META) and Microsoft (MSFT) revealed investors are setting a high bar for Big Tech.

Experts say the set-up is favorable for defensive sectors like consumer staples and industrials. “We see more room to run for Staples, which is still very underweight by active funds,” wrote BofA analysts on Wednesday. The sector could also benefit from policies coming out of Washington, D.C., meant to address voters’ affordability concerns ahead of November’s midterm elections.

But some warn not to write off growth stocks yet. Investors may return to paying a substantial premium for fast-growing tech companies if economic growth moderates later this year, said Ned Davis analysts.