Money Peak: Technology Sector Report

March 15 – 22, 2026

🔍 Market Overview

The technology sector experienced a decline of –2.03% during the reporting week, making it the second worst sector after utilities (which fell by –7.36%). Nonetheless, it fared relatively well against the broader market, as investors continued structural investments in AI infrastructure.

Movements within the sector were mixed in a manner that is significant for investors. While semiconductor companies and optical communication infrastructure benefited from the ongoing AI investment wave, traditional software companies faced valuation pressure. Shares of Microsoft dropped approximately –1.84% over the week, Meta Platforms was down –2.15%, Alphabet decreased by –2.00%, and Amazon.com fell by –1.62%. Apple performed relatively well with a decline of –0.39%, supported by a 23% increase in iPhone sales in China at the start of 2026, despite a contracting overall market in the country.

The overarching trend is clear: infrastructure and AI hardware continue to grow, while software valuations are under pressure as investors increasingly question whether AI will complement the traditional SaaS model—or ultimately replace it in the long run.

💡 Key Drivers This Week

The Semiconductor Cycle Gains Momentum

The most significant impulse of the week came from the semiconductor sector. The world's largest contract manufacturer, TSMC, raised its investment plan for 2026 to 52 to 56 billion USD—an increase of 27 to 41% compared to the 41 billion USD in the previous year. The company controls around 60% of the global foundry market and almost 90% of advanced chip manufacturing. For the full year 2026, management forecasts revenue growth of 29% and adjusted earnings growth of 33%, effectively marking the period from 2024 to 2027 as a doubling of revenue and profit.

Crucially, these investments are not speculative in nature. They respond to specific orders from hyperscalers—the large data center providers investing billions in AI infrastructure. This distinguishes the current cycle from previous phases, where capital expenditures anticipated demand expectations.

Optical Communication: An Underestimated Beneficiary

Within the semiconductor ecosystem, one subsector stood out: optical communication components. Companies in this area reported a 35% year-on-year increase in total revenue for 2025, with an even stronger growth of 61% in the enterprise segment, which primarily serves data centers. The background: data centers are increasingly transitioning to fiber optics, as conventional copper cabling can no longer meet the demands of highly modern AI workloads. The superiority of fiber optics in terms of transmission speed and energy efficiency makes this upgrade cycle economically imperative—and long-term in nature.

Software: Valuations Under Pressure

The picture in the software sector is more nuanced. Even operationally strong companies—such as cybersecurity providers with 80% growth in the AI security segment and accelerated customer acquisition—faced significant selling pressure. Not because the business deteriorated, but because investors adjusted valuation multiples downward. The core question driving this reevaluation: Does AI make software products cheaper and more interchangeable—or does it create new, higher-value revenue streams?

Microsoft exemplifies this tension. The stock is priced about 25% below its yearly high, now considered the cheapest member of the so-called "Magnificent Seven", while simultaneously benefiting from strong growth in Azure Cloud and an order book of around 625 billion USD. The P/E ratio (TTM) is approximately 23.8—significantly below historical levels.

📊 Comparative Metrics: The Magnificent Seven in the Technology Sector

Note: The extraordinarily high ROE of Apple is due to negative equity resulting from massive stock buybacks—not a quality feature in the classical sense, but an expression of the capital return policy. Dividend yields have not been included in the table due to their largely insignificant impact (less than 1%).

⚠️ Challenges and Risks

Aside from valuation questions in the software sector, geopolitical risks deserve particular attention. Regional tensions in supply chains for critical materials—relevant for companies like Apple, but also for semiconductor suppliers in general—remained a latent issue this week. Tim Cook's visit to China underscores the market's continued importance for Apple: iPhone sales there rose by 23% at the beginning of 2026, despite the overall market contracting. Meanwhile, Beijing demands further concessions, such as on App Store fees.

Another risk: The rotation from growth stocks to "old economy" dividend stocks, which market observers have noted since the beginning of the year, could continue if energy prices remain high and interest rate cuts by central banks are delayed—directly impacting the valuation of capital-intensive tech businesses.

🔭 Outlook

The structural wave of AI investments shows no signs of abating. The demand for computing power, fiber optic infrastructure, and advanced chips is growing—driven by a self-reinforcing cycle of increasing AI model complexities and expanding application fields. Alphabet reports over 750 million monthly active users for its Gemini app, Amazon pursues a return to the smartphone market after a decade-long hiatus, and Microsoft signals sustained growth confidence in Azure.

In the short term, the headwinds for the sector are real: valuation pressure on software, geopolitical uncertainties, and a fourth consecutive negative trading month for U.S. stocks overall. In the medium term, however, those companies enabling AI infrastructure—from chip manufacturers and network providers to cloud providers—are likely to be the structural winners of this technological transformation phase.

✅ Actionable Insights for Investors

1. Infrastructure over Software—for now. The strongest fundamental signals currently come from the semiconductor and network sectors. TSMC's CapEx increase and the demand for optical communication reflect real order backlog—not anticipation.

2. Critically observe software valuations. The recent valuation declines in software companies do not automatically signal buying opportunities. The crucial question is whether the respective business model is strengthened or endangered by AI. Investors should differentiate between these scenarios rather than opting for the sector as a whole.

3. Keep an eye on Microsoft. The company presents the lowest valuation among the major tech platforms with a TTM P/E of 23.8—amid continued strong cloud growth and a substantial order backlog. Whether the current level provides an attractive entry point depends on individual risk tolerance and investment horizon.

4. Do not underestimate geopolitical supply chains. Many tech companies' dependence on Taiwan, as well as rare raw materials, remains a structural risk. For investors with exposure to semiconductor companies or Apple, it is advisable to regularly review this risk factor.

5. Keep an eye on sector rotation. The ongoing shift from growth to dividend stocks could mean further short-term pressure on tech stocks. Investors already in the sector should check if their portfolios are sufficiently diversified against an extended rotation scenario.

This report is for informational purposes only and does not constitute individual investment advice within the meaning of the German Banking Act (KWG) or BaFin regulation. The analyses presented are illustrative and reflect general market opinions. Investment decisions should always be made considering personal risk tolerance, investment horizon, and after consulting with a qualified financial advisor.

— Money Peak Editorial Office, March 22, 2026