Tech Lags Behind as the S&P 500 Mounts Its Latest Recovery

The S&P 500 has climbed back to within reach of a new all-time high but this time, the rally isn’t being driven by Big Tech. Companies like Eli Lilly & Co., Cardinal Health Inc. and Biogen Inc. are among the top 10 performers in the S&P 500 since Oct. 28, the last day the index finished at a record. Meanwhile, the S&P 500 Information Technology index has slipped 4.2% over that same period, with the steepest declines coming from the once-dominant Magnificent Seven stocks, including Nvidia Corp. and Microsoft Corp.

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This shift highlights how investors remain uneasy about the artificial intelligence boom, especially as questions grow around lofty valuations and whether massive spending on AI infrastructure will translate into sustainable profits.

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Yet the strong performance across healthcare, biotech, and other sectors suggests renewed confidence in the broader US economy. That optimism has been building as investors increasingly expect the Federal Reserve to continue lowering interest rates.

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“Leadership is ready to rotate,” wrote RBC Capital Markets strategists led by Lori Calvasina. She noted that institutional investors have expressed persistent concerns in recent meetings ranging from the durability of the AI trade to anxiety over market concentration and the dominant role of the Magnificent Seven.

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Although a few tech names have posted recent gains such as Teradyne Inc. and Western Digital Corp. the biggest engines of the market’s previous rally have stumbled. Meta Platforms Inc. has dropped 14% since the S&P 500’s October peak, while only Alphabet Inc. has held up well among the heavyweight tech giants.

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It’s a remarkable reversal from earlier this year. After the sharp pullback following the “Liberation Day” tariff announcements in April, tech stocks powered the S&P 500 back into positive territory.

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On Oct. 29, the sector reached a record share of the benchmark index, representing roughly 36% of the S&P 500. Even now, tech valuations remain lofty, with the group trading at a forward price-to-earnings ratio near 28 close to the upper end of its two-decade range.

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Yet despite the recent slump, technology companies continue to deliver strong earnings growth as businesses aggressively expand their data-center footprints. That trend could cap how far any rotation out of tech can go unless other industries begin posting more robust profit gains of their own.

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“A shift in earnings dynamics is still needed for this transition to have significant duration,” Calvasina’s team wrote, emphasizing that a durable leadership change in the market depends on more than short-term sentiment. Investors will have to see consistently stronger earnings from non-tech sectors before fully replacing Big Tech as the market’s primary driver.

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