Goldman Sachs Spots Buying Opportunity in Bruised Big Tech

After years as stock market heavyweights, Big Tech shares are looking a lot like an early Rocky Balboa: beaten up and on the ropes. 

The beat-down has been such that even members of the Magnificent Seven are undervalued and investors should buy the dip, Goldman Sachs analyst Peter Oppenheimer wrote in a note to clients Tuesday. The Roundhill Magnificent Seven ETF — which offers equal exposure to Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — has slid roughly 11% for the year amid concerns about artificial intelligence disruption and the war with Iran, which has choked oil supplies. But continued military conflict could prompt central banks to cut interest rates to avoid a recession, and that’s something tech stocks tend to like. 

“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,” Oppenheimer wrote in the note, published before a two-week ceasefire was agreed to on the condition that Iran reopens the Strait. “Given the relative insensitivity of the 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.”

Go the Distance 

Tech giants have been synonymous with growth in recent years. But now they’ve fallen behind some surprising market stalwarts. Walmart, for example, is trading at a higher price-to-earnings ratio than Amazon. 

“That’s a bit of an anomaly,” Jed Ellerbroek, portfolio manager at Argent Capital Management, told The Daily Upside. Typically, the faster-growing companies trade at higher multiples. So it’s a good opportunity to buy big tech stocks, Ellerbroek adds. Not only because they’re relatively inexpensive, but because “their businesses are performing really well,” which he predicts will be underscored during quarterly earnings reports. 

Investors looking to buy the dip will have a long shopping list: 

• Morningstar recently named Microsoft as one of the most undervalued stocks to buy. Broadcom and NXP Semiconductors were also on the list. “We remain confident in secular tailwinds in tech, including cloud computing, artificial intelligence and the long-term expansion of semiconductor demand,” the analysts wrote. “After months of poor performance, we see software as offering the most upside within the sector.” 
• Alongside tech, Morningstar says communication services, real estate and consumer cyclical stocks look the most undervalued at the start of the second quarter. Energy and consumer defensive stocks look the most overvalued. 

Tesla in the Ring: Tesla, whose stock is down around 21% for the year, seems to be itching to rejoin its Mag Seven tech peers, announcing a partnership with Intel on Tuesday. Intel is collaborating with Elon Musk on the Terafab project to design chips for Tesla, SpaceX and xAI. “Terafab represents a step change in how silicon logic, memory and packaging will get built in the future,” Intel CEO Lip-Bu Tan said on X.