Big Tech Underperforms S&P 500 Over 90% of the Time in 2026; Barclays Points to Valuation Compression as Key Driver
nashnova research
Barclays reports the 'Magnificent Seven' (ex-Tesla) have underperformed the S&P 500 on 92% of trading days this year, driven mainly by multiple compression; surging Treasury yields and rate-hike expectations echo the 2022 playbook.
Losing on 92% of trading days — what exactly is going wrong?
Barclays derivatives strategist Stefano Pascale notes that Alphabet, Amazon, Apple, Meta, Microsoft, and Nvidia have trailed the S&P 500 on 92% of trading days this year.
At this pace, the stretch would rank as one of the worst 12-month runs since 2013, second only to 2022.
This means → Big Tech isn't suffering a sudden crash; it is falling behind the broad market almost every single day — the problem is structural.
What is "multiple compression," and why is it the main driver?
Pascale states plainly: "Multiple compression is the primary driver of Big Tech's underperformance this year."
In plain terms = the price investors are willing to pay for each dollar of these companies' earnings is shrinking — profits aren't collapsing, but the market no longer wants to pay premium prices.
On the day, the Invesco QQQ ETF fell more than 1%, while the S&P 500 dropped less than 1% — the gap was visible in real time.
Why are rising Treasury yields pouring fuel on the fire?
The 10-year Treasury yield hit 4.8% intraday, a nearly 20-month high; the 30-year broke through 5.2%.
Two triggers: fresh U.S. strikes on Iran pushed energy prices higher, and some weaker-than-expected U.S. economic data reinforced expectations of a Fed rate hike in September.
This means → the higher the risk-free rate climbs, the less reason investors have to pay up for expensive tech stocks — nearly 5% from Treasuries with no risk makes a compelling alternative.
Why does this look like a 2022 replay?
Pascale flags that the current macro backdrop is highly similar to 2022.
Back then, Big Tech was seen as the primary victim of the Fed's aggressive tightening and post-pandemic multiple compression.
This reflects a recurring pattern: when rates rise fast, the market's first targets are the most expensive stocks — and Big Tech sits at the top of that list.
Can AI-linked financing come to the rescue?
Barclays notes that emerging AI-linked financing models could "alleviate concerns on the capex front."
Pascale's core logic: over time, this should ease worries that hyperscalers' capital spending is running ahead of cash flow, while unlocking demand that previously lacked funding.
In plain terms = if AI businesses can generate their own financing, hyperscalers won't have to keep burning their own cash to expand capacity — a positive for both cloud giants and the semiconductor sector.
What is the next thing to watch?
Whether rate-hike expectations actually materialize at the September meeting is the key test for Big Tech valuations.
This means → if September brings a real hike, multiple compression likely continues; if expectations fade, a rebound window opens.
Until then, Big Tech's situation boils down to one line: rates stay tight, valuations stay under pressure.
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