Tech Stocks: 2026 Rotation into Old-School Values

Wall Street is executing a strategic reweighting away from technology stocks, which have driven the bull market in recent years. Rising borrowing costs and critical valuations are putting pressure on the sector, while investors are increasingly turning to traditional value investments.

UBS sees moderate growth with uncertainties

Swiss financial services firm UBS forecasts the S&P 500 at 7,700 points by the end of 2026 under its base case scenario, representing an increase of around 15 percent (Source: UBS Investment Outlook 2026). In an optimistic scenario of a technology boom, the index could even rise to 8,400 points. This forecast shows the range of possible developments and clarifies that the potential depends heavily on further developments in the technology sector.

Magnificent Seven losing momentum

The so-called "Magnificent Seven" – those seven U.S. tech stocks that have long been the undisputed market stars – could play a secondary role in 2026. An independent capital markets expert forecasts in his annual outlook a significant shift in market dynamics (Source: Handelsblatt). The move away from these dominant technology giants marks a remarkable change after years of outperformance.

Wall Street is increasingly reorienting its focus for the current trading year. While technology stocks have been the driving force of the bull market in recent years, signs of a strategic rotation toward "old school" approaches are mounting. This shift is based less on fundamental weakness in technology companies than on changed framework conditions in the capital markets.

Rising capital costs burden valuations

Rising interest rates and borrowing costs are putting significant pressure on technology stocks in particular. Jochen Stanzl, Chief Market Analyst at Consorsbank, points out that this makes the billion-dollar expansion of AI data centers more expensive (Source: FAZ). Higher financing costs have a particularly strong impact on growth-oriented companies whose valuations depend more heavily on future cash flows.

Investors are increasingly questioning rising borrowing costs and are no longer willing to accept the high valuations in the sector. This changed risk perception leads to valuation corrections that put established tech stocks under pressure. The combination of higher interest rates and elevated multiples is proving detrimental to price development.

AI remains a future theme despite early stage

Despite the current rotation out of technology stocks, artificial intelligence technology is still in an early stage of development. Shaan Raithatha forecasts that supply will change again in 2026 through greater use of artificial intelligence (Source: Berliner Morgenpost). AI remains a key factor for the long-term development of equity markets, even if short-term valuation questions dominate.

Investors who prefer a more stable strategy will find much more predictable metrics with established quality stocks that have solid cash flows. A well-balanced portfolio should contain speculative AI bets only as a controlled component, while the focus should be on companies with demonstrated profitability.

Outlook for retail investors in the DACH region

The strategic reweighting at U.S. stock exchanges is also affecting investors in German-speaking countries. DAX and SMI also show signs of broader market participation, where technology stocks alone no longer drive performance. For retail investors, this means that diversification across sectors is becoming more important.

The valuation question remains central: while technology stocks benefited from declining interest rates in recent years, this effect is now reversing. Investors must weigh whether long-term growth opportunities from AI and digitalization justify current valuation levels or whether defensive stocks with stable yields appear more advantageous.