The US technology sector is undergoing its toughest valuation test since the dot‑com crash. The NASDAQ Composite has officially entered a correction amid the escalating military conflict between the US and Iran. However, analysts at Capital Economics view the current decline as a temporary re-pricing of assets rather than the start of a systemic market collapse.

Although the forward price‑to‑earnings (P/E) multiple for the IT sector within the S&P 500 has nearly converged with the rest of the market, the fundamental link between profits from AI adoption and long‑term growth remains intact. The sharp drop in market quotes has inevitably prompted comparisons to the 2000 tech bubble, when market slumps presaged a complete breakdown in corporate earnings expectations.

Capital Economics highlights a key difference: the convergence of big‑tech multiples with the broader market merely removes the initial “euphoria premium,” not a harbinger of profit recession. Unlike the speculative startups of the late 1990s, today’s hardware and software makers are deeply embedded in global infrastructure. They have solid balance sheets and generate strong cash flows even amid high inflation, giving them remarkable resilience.

Although the escalation in the Middle East has triggered a broad rotation into safe‑haven assets, institutional investors increasingly view the current correction as a “healthy reset.” Analysts assume this market sentiment clears the way for a recovery by mid-year once the fundamental environment gets back on track.

Meanwhile, Wall Street is anticipating the corporate earnings season starting in April, which will serve as the main stress for the sector. If the armed conflict does not spread beyond the Middle East, and the energy market rally is tamed, the US high-tech sector should again show outstanding performance. For now, the market is balancing geopolitical risks against AI’s long‑term potential, and many funds are using the drawdown as a strategic entry point for targeted long positions.