Tech stocks have fallen 11% from their October peak — a "correction" in Wall Street terms (a drop of 10% or more). The companies themselves are still reporting strong profits. The selloff is being driven by the Iran war and the resulting oil price shock, not by collapsing tech demand. Our call: Hold. Don't panic-sell, but don't rush in either. The situation is genuinely uncertain. The single most important date to watch is April 6, when the president's pause on attacks against Iran's energy infrastructure expires. How that deadline resolves will likely determine whether tech bounces or falls further.
On Friday, March 27, the Nasdaq-100 — an index of the 100 largest non-financial companies, dominated by big tech — closed at 23,133, down 11.4% from its all-time high set in October 2025. It was the fifth straight week of losses. Here's what drove it, in order of importance:
🔴 The Iran war and oil prices — by far the biggest factor. The U.S.-Iran conflict that started in late February has severely disrupted shipping through the Strait of Hormuz, a narrow waterway that normally carries about a fifth of the world's oil supply, according to the Congressional Research Service. Oil prices have surged roughly 55%, from about $70 a barrel before the war to above $110. On Thursday, the president announced a 10-day pause on strikes against Iran's energy facilities, creating an April 6 deadline. But markets weren't reassured — oil kept climbing Friday and stocks kept falling.
Why this hurts tech specifically: expensive oil raises inflation fears, which pushes interest rates higher. When rates rise, investors pay less for each dollar of a company's expected future profit — and tech stocks depend more heavily on future profit expectations than most other sectors.
🟡 A Google AI discovery spooked chip stocks. Google announced a technique called "TurboQuant" that could reduce the memory chips needed to run AI systems. Memory chipmakers dropped 5–6%, though most analysts think this is about making AI faster and cheaper, not about needing fewer chips overall.
🟡 Meta and YouTube were found liable in an addiction trial. A California jury ruled against Instagram and YouTube in a landmark case about social media addiction in children. Meta fell 8% and Alphabet (Google's parent) fell about 3%.
🟠 Software stocks were already under pressure from AI disruption fears. Even before the war, software companies had been selling off since January on worries that AI tools could replace traditional business software. Software stocks are down roughly 17% this year as of early March.
🟠 Interest rate hopes faded. The Federal Reserve held rates steady at 3.5–3.75% on March 18. At the start of the year, investors expected two rate cuts in 2026. Now they expect at most one.
Tech stocks are trading at about 30 times their expected future earnings — meaning investors are paying $30 for every $1 of profit these companies are expected to earn next year. That's roughly in line with the five-year average but above the ten-year average of about 27 times.
Here's the catch. Flip that ratio around: tech stocks are effectively yielding about 3.3% on their earnings. But a 10-year U.S. government bond — one of the safest investments in the world — currently yields about 4.4%. So right now, tech stocks offer a lower return than a risk-free bond, which means investors are paying a premium for growth that hasn't happened yet. If that growth disappoints even modestly, stock prices can fall even if earnings stay okay, because investors become willing to pay less per dollar of profit. That is why strong earnings do not automatically make this a buying opportunity.
These companies are also pouring enormous sums into AI infrastructure — Meta plans to spend $115–135 billion this year on capital projects; Alphabet guided $175–185 billion, roughly double last year's pace. Microsoft reported $37.5 billion in capital spending and equipment leases in a single quarter. The risk isn't that their businesses are shrinking. It's that they're investing massively, and it's not yet clear those investments will generate proportional returns. If the economy weakens from the oil shock at the same time these spending bills come due, profit margins could shrink.
The University of Michigan's consumer sentiment survey fell 6% in March to its lowest since December 2025. Americans' one-year inflation expectations jumped from 3.4% to 3.8% — the largest one-month increase since the tariff scare in April 2025. If consumers pull back spending, that eventually hits the digital advertising and e-commerce revenue that these companies depend on.
That combination — full valuations, heavy spending commitments, and a consumer starting to worry — is why the right call is patience, not action, despite fundamentally healthy businesses.
Our call: Hold. Be patient. Wait for clearer signals. The evidence points to the Iran war and oil prices as the primary driver of this selloff, not a collapse in tech demand. But the situation is genuinely uncertain, and stocks are not cheap enough to justify betting big on a resolution.
Here's the practical guidance based on where you sit:
This is not a buy list — any individual stock can drop 20–30% in a correction regardless of its business quality. But if you already own tech and are deciding what to hold or add on further weakness, the areas with the most visible demand are:
Consumer internet companies (Meta, Amazon) have strong businesses but face the most direct exposure to a consumer spending pullback if the oil shock persists. Software companies have been hit hardest (down ~25% from their September peak as of early March) and could rebound sharply if sentiment improves, but the AI disruption question is real and will take years to resolve.
We'd become more aggressive buyers if: the Strait of Hormuz reopens and oil drops below $85, the Fed signals rate cuts are back on the table, or stock prices fall enough that the math becomes more compelling.
We'd become more defensive if: oil exceeds $130 and stays there, any major tech company misses earnings or cuts its spending guidance, or interest rates rise above 4.75% on the 10-year Treasury.
Three signals will tell you whether this correction is ending or deepening:
These are rough estimates based on how the main variables (oil, rates, earnings) might evolve. They are not precise forecasts — shifting any assumption would meaningfully change the numbers.
When you average these four scenarios by their estimated likelihood, the expected result over the next year is roughly flat — maybe slightly negative. That is not a strong enough expected return to justify a big bet right now. But the positive scenarios (about 60% combined probability) are meaningfully better than the negative ones, which is why we lean toward patience rather than outright selling.
In the interest of honesty:
Some figures in this summary are based on management guidance and reported estimates, not final audited results. Treasury yield figures are approximate as of the March 27 close.
An 11% drop in tech stocks is uncomfortable but not historically unusual. Looking at similar past episodes:
The pattern from that small sample: when the cause resolved quickly, the rebound was quick. When the problem persisted, the pain dragged on. Whether this correction follows the 2025 or the 2022 pattern depends almost entirely on what happens with Iran and oil — and that is a geopolitical question, not a stock-picking question.