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

• Bank of America clients have invested more in consumer staples stocks in the past month than any four-week period since 2008, while selling tech stocks in four of the past five weeks
• The Magnificent Seven now account for a record 27.8% of S&P 500 earnings, but 90% of S&P 500 companies beat Q4 earnings estimates, suggesting growth is broadening beyond Big Tech
• JPMorgan strategists view the rotation as addressing concentration risk concerns, with defensive sectors like consumer staples and industrials positioned to benefit from current market dynamics and Washington policy initiatives

Market Summary: Tech Sector Rotation Deemed "Healthy" by Analysts

Key Developments

A significant sector rotation away from technology stocks into defensive sectors has accelerated, with experts at JPMorgan Private Bank calling the shift "healthy" for markets. The S&P 500 remains up less than 1% year-to-date, while the tech-heavy Nasdaq has turned negative, down 2% in recent trading.

Sector Performance

Technology has become the worst-performing S&P 500 sector in 2026, declining approximately 4% as concerns mount over AI's disruptive potential for memory chip and data storage companies. Conversely, energy and consumer staples sectors have surged double digits since year-start, signaling a major leadership transition.

Market Positioning

Bank of America data reveals record flows into consumer staples stocks—the highest both in absolute terms and as a percentage of market cap since tracking began in 2008. Tech has seen net selling in four of the past five weeks, reflecting growing concerns about concentration risk.

Magnificent Seven Dynamics

The Magnificent Seven now represents a record 27.8% of S&P 500 earnings, according to Ned Davis Research. However, their dominance faces pressure as 90% of non-tech S&P 500 companies beat Q4 earnings estimates, creating opportunities for valuation compression.

Upcoming earnings reports from Alphabet (Wednesday) and Amazon (Thursday) will test investor appetite for Big Tech, following mixed reactions to Meta and Microsoft results.

Outlook

BofA analysts see "more room to run for Staples," noting active funds remain significantly underweight. However, Ned Davis warns against dismissing growth stocks entirely, suggesting investors may return to tech if economic growth moderates later this year.