Tech Stocks Now Cheaper Than S&P 500 for First Time Since 2017
Tech stocks in the S&P 500 now trade at about 17 times expected earnings, below the index's 18 times, for the first time since 2017. Chips led a fourth straight weekly loss for the main indexes, while the typical stock held near a record.
Tech stocks are now cheaper than the S&P 500 for the first time since 2017, after a selloff that hit chipmakers hardest. Technology shares in the index traded at about 17 times expected earnings in the latest week, below the broader index's 18 times, Truist Wealth chief investment officer Keith Lerner wrote in a note.
At the October 2025 peak, the sector fetched 32 times expected earnings. Lerner said the market had "baked in a lot of good news" at that level. "Arguably, at almost half that level, the market is already pricing in a lot of bad news," he wrote.
The S&P 500 and the Nasdaq each fell about 3% for a fourth straight losing week. The week ended with a bounce in chip stocks on Friday.
Wall Street had rallied the day after the US midterm elections. It then woke up to what the report described as tech's worst day since the 2020 COVID crash.
Chips take the brunt
The PHLX Semiconductor Index fell for a fifth straight week and lost nearly 30% over that stretch, according to calculations in the analysis. Micron and Sandisk each lost more than 20% in the latest week alone.
Lerner sees "something of a buyers' strike in tech." He said chips are the first to feel any slowdown in data-center building, a risk that hung over the midterms.
A slower build-out could help the biggest AI spenders, he added. "If this forces a little bit of a slowdown and maybe a little bit of positive in cash flow, I think that could actually elongate the cycle," he said.
Most stocks barely moved
Outside the AI trade, the damage was limited. The equal-weight S&P 500, a stand-in for the typical stock, closed at a record on Wednesday and finished the week within about 1% of where it started.
Truist advises staying overweight US large caps. It also suggests adding small caps "as a partial hedge against periodic sharp rotations away from megacap tech." The firm notes that stocks have risen in the year after every midterm since 1946.
What history shows
The S&P 500 has had 33 streaks of four or more losing weeks since 1990. Three months later, it was higher about 80% of the time, with a median gain of 6%, according to calculations in the analysis. The typical three-month return after any week is about 3%.
The exceptions came during the dot-com bust and the 2008 financial crisis. In both, the S&P 500 kept falling for another year.
Not everyone sees a buying opportunity. Michael Martin, founder of TraderMindset.com, said: "It's a time to harvest cash right now. I don't think these are buying opportunities. Everything's in a downtrend."
Martin also dismissed the cheaper valuations. "Lower prices mean lower market cap. It doesn't mean better value," he said. He would only "nibble" with call options if the S&P 500 holds its 200-day moving average, a widely watched trend line.
Lerner sees the setup shifting. "We are moving toward a situation where a little good news could go a long way," he said.
