Investors are returning to technology stocks. A significant downturn in the tech sector at the beginning of 2026 unexpectedly turned many previously high-valued leading companies into lower-priced investment opportunities.

The technology-heavy Nasdaq Composite Index rose for a second consecutive day, closing up 0.8% on Wednesday, marking its largest single-day gain in over a week. If the upward trend continues through Friday, the index will end its longest weekly losing streak in nearly four years. As of last Friday, the Nasdaq had declined for five consecutive weeks.

Following the market's advance into its third year, investors began to worry about excessive valuations for certain stocks, particularly in the technology sector. They shifted their allocations towards financial and consumer goods sectors—industries perceived as less vulnerable to disruption by artificial intelligence. Year-to-date, the equal-weight S&P 500 index has risen 6.1%, while the standard S&P 500 index has gained only 0.5%.

For the first time in weeks, investors are recognizing that their reaction may have been excessive.

Jason Pride, Chief Investment Strategist and Researcher at Glenmede, stated, "Investors are likely thinking, I probably should have more growth or tech exposure in my portfolio."

The S&P 500 index rose 0.6% on Wednesday, while the Dow Jones Industrial Average increased by 0.3%, or 129 points.

Walmart's forward price-to-earnings ratio climbed to nearly 45 times last week, reaching a 26-year high. Meanwhile, Amazon's forward P/E ratio fell to 25 times, a 17-year low. Nvidia's P/E ratio now stands below 24 times. These ratios reflect the price investors are willing to pay for each dollar of earnings.

Jay Hatfield, CEO of Infrastructure Capital Advisors, commented, "What was expensive is getting cheaper, and what was cheap is getting more expensive, and the market is starting to recognize that."

Chip design firms Cadence and Synopsys rose 7.6% and 4.8% respectively, after Cadence reported quarterly results and annual guidance that exceeded expectations. E-commerce companies DoorDash and Shopify advanced 6.8% and 7.1% respectively. Chip giant and market heavyweight Nvidia saw its shares rise 1.6% following a significant AI chip deal with Meta. Analog Devices' stock increased 2.6% after reporting better-than-expected quarterly results and guidance.

Concurrently, UBS raised its forecast for borrowing by hyperscale cloud providers—such as Amazon, Meta, and Google—for data center construction and other capital expenditures to $360 billion this year. Concerns over such massive spending were one factor behind the Nasdaq's recent pullback. The index had gained 20% in 2025 but remains down 2.1% year-to-date as of Wednesday.

Many investors continue to engage in sector rotation. Bank stocks rose, with Goldman Sachs gaining 1.9% and Wells Fargo advancing 1.3%. Dollar Tree increased by 3.1%. Previously popular 2026 stocks like Home Depot and McDonald's traded nearly flat.

Richard Steinberg, Senior Global Market Strategist at Focus Partners Wealth, said he expects investors to maintain their focus on tech stocks throughout 2026, alongside less prominent, high-dividend-yielding stocks.

"People aren't abandoning these stocks; they are just broadening their exposure and becoming less concentrated. That's healthy," Richard Steinberg noted.

Minutes from the Federal Reserve's meeting last month, released on Wednesday, indicated that officials have no intention of cutting interest rates, with most preferring to see further progress on inflation. Data from interest rate futures shows traders assign a 94.1% probability of the Fed holding rates steady at its next meeting, up from 92.6% on Tuesday.

The yield on the 10-year U.S. Treasury note rose to 4.08% from 4.053% on Tuesday. Economic data showed industrial production increased, while durable goods orders fell less than expected. Major global stock indices also climbed. Several key Asian markets were closed for the Lunar New Year holiday. The U.S. dollar strengthened, particularly against the New Zealand dollar. Crude oil futures rose as traders monitored tensions between the U.S. and Iran.