Tech stocks led a three-day sell-off last week, but some on Wall Street remain confident in the trade, citing a key factor: profits. “Earnings growth, which continued to grow at nearly 30% in the fourth quarter, shows no signs of slowing yet,” Deutsche Bank strategists led by Parag That said in a note Friday. While analysts’ consensus forecasts are for tech profit growth to be a “remaining strong” 23% this year and slow to 20% in 2027, future expectations for mega-cap growth and tech (including software) have actually risen this fiscal year, the New York-based strategists wrote. Software stocks in particular were a driving force behind last week’s market decline as investors grew concerned that artificial intelligence could disrupt business models. The iShares Expanded High-Tech Software Sector ETF (IGV) fell for eight straight days through last Thursday, ending with a drop of nearly 9%. The ETF’s largest positions are in Microsoft, Palantir Technologies, and Salesforce, which entered a bear market late last month and are down 22% so far in 2026. Meanwhile, the Nasdaq Composite Index fell 2% to close at the bottom, while the S&P 500’s information technology sector fell more than 1%. For CFRA Research’s Sam Stovall, recent moves in the information technology sector are simply a “necessary consumption of past profits”, with the group expected to post record profit growth in 2026 and 2027. “CFRA’s equity analysts reminded us that if this EPS growth expectation continues going forward, investors will be glad they stayed the course,” Stovall, chief investment strategist, wrote on Monday. JPMorgan’s Market Intelligence Desk said the currently released fourth-quarter results are “strong” and that the company is on pace to post its fastest revenue growth since the third quarter of 2022 and record profit margins. He said sales rose 20.4% and profits rose 30.4%, led by technology stocks. “The exhaustion of AI is clear,” he said, and while AI may continue to be sold as the “Magnificent Seven,” software is being bought, and JPM remains “tactically bullish” on the overall market.
