US tech stocks struggle as Iran conflict hits markets
Tech shares have declined 8% since the Iran conflict began a month ago. The slump has pushed the Nasdaq into a correction and pressured the S&P 500 index.
Technology shares, long considered reliable shelters during market volatility, are failing to provide a safe haven as the conflict involving Iran continues to rattle global investors. This shift represents a significant challenge for the broader United States equity market, which has relied heavily on megacap growth to sustain its multi-year bull run. While massive tech firms are typically prized for their robust earnings and competitive advantages, the sector has deepened its recent declines. Market strategists note that the current environment is putting pressure across all asset classes. > Everything is getting hit in this environment, and tech is no exception, said Angelo Kourkafas, senior global investment strategist at Edward Jones. The tech sector within the S&P 500 has retreated approximately 8% since the onset of the regional hostilities, mirroring the performance of the wider index. However, specific megacap leaders such as Meta Platforms, Inc. and Alphabet Inc. have experienced even more pronounced sell-offs. The Nasdaq Composite has officially entered a technical correction, finishing more than 10% below its all-time high reached in October. Several factors are driving this downward trend. Investors looking to mitigate risk are reportedly liquidating positions in their most successful holdings to lock in profits. > Maybe people are taking a little risk off of those names, where they made the most money, said Walter Todd, chief investment officer at Greenwood Capital. Rising Treasury yields, fueled by inflation fears linked to the war, have further pressured valuations. Additionally, the industry faces internal headwinds, including massive capital expenditures on artificial intelligence data centers and recent legal setbacks for social media giants. > You just have this perfect storm that is providing headwinds for megacap tech and tech, broadly speaking, said Matt Orton, chief market strategist at Raymond James Investment Management. The influence of these companies remains outsized, with the tech sector accounting for roughly one-third of the S&P 500's total weight. The Magnificent Seven group—which includes NVIDIA Corporation, Apple Inc., and Amazon.com, Inc.—maintains a similar level of concentration, meaning the broader market struggles to stabilize until these leaders find a floor. Despite the recent turmoil, the long-term profit outlook for the sector remains positive, with earnings growth projected at 43% for 2026. This potential for growth may become increasingly attractive if high energy costs dampen overall economic expansion. Furthermore, the recent price drops have brought valuations down to more reasonable levels. > As stock prices come down, the risk in owning them is also coming down, said Chris Galipeau, senior market strategist at Franklin Templeton.
