Goldman Sachs Major Report: US Tech Stocks Overvalued, Recommends Shifting to Japan & India
On July 27, 2026, Goldman Sachs released its latest global stock market valuation report, stating that US tech stock valuations have climbed to historical highs. In comparison, the Japanese and Indian markets offer more attractive valuations, suggesting investors moderately reduce holdings in US tech stocks and shift focus to Japan and India. This move has sparked lively discussion on cross-market sector rotation and provides new perspectives for global asset allocation.
US Stock Valuations Soaring, Tech Stock Risks Building
The report shows that the Nasdaq index currently has a forward P/E of around 35x, far above the historical median of 25x. Among them, AI-related semiconductor and software companies have P/E ratios generally exceeding 50x, well above traditional sectors. Goldman Sachs analysts note that while the long-term AI trend is clear, short-term market optimism is excessive. If earnings or economic data disappoint, profit-taking selling pressure may emerge.
Additionally, uncertainty remains around US Federal Reserve interest rate policy. Although the July meeting kept rates unchanged, inflation data volatility has raised market expectations for a September rate hike. High interest rates are unfavorable for the cost of capital for high-valuation growth stocks, compressing their premium space.
Fund Flows: Emerging Markets and Japan Become Favorites
In fact, global funds have quietly started shifting recently. According to EPFR Global data, as of July 25, emerging market equity funds have seen net inflows for six consecutive weeks, with India and Taiwan attracting the most capital. Japan's stock market, benefiting from the yen's depreciation and corporate governance reforms, has seen continued foreign buying. The Nikkei 225 index has risen about 15% year-to-date, yet its P/E ratio stands at only about 18x, far below that of US stocks.
Goldman Sachs particularly highlights India, citing its massive demographic dividend, accelerating digital transformation, and policy support, making it a long-term growth target. The Nifty 50 index currently trades at a P/E of about 22x. While not cheap, considering GDP growth above 7%, its growth potential supports valuations. Japan benefits from manufacturing reshoring and semiconductor supply chain restructuring, with corporate profit expectations continuing to be revised upward.
Cross-Market Sector Rotation: From Tech to Value and Cyclicals
In terms of cross-market sector rotation, Goldman Sachs advises investors to focus on the following three directions:
- Japanese Value Stocks: Benefiting from the return of inflation and rising rate environment, banks, insurance, and industrial stocks are seeing earnings improvement with low valuations. For example, Mitsubishi UFJ Financial Group has a forward P/E of only 11x and a dividend yield of 3.5%.
- Indian Tech Services and Consumer Stocks: Indian IT services giants such as Infosys and Tata Consultancy Services benefit from global digital transformation orders and trade at discounts compared to US peers. Additionally, Indian domestic consumer stocks like Hindustan Unilever offer long-term growth potential.
- Chinese ADR Rebound Opportunity: With Chinese regulatory stability and economic stimulus policies, Chinese ADRs such as Alibaba and Tencent have rebounded about 10% in the past month. However, Goldman Sachs warns that geopolitical risks remain, so allocations should be based on long-term holding principles and avoid heavy positions.
Cross-Border Investment Hedging Tips
For Chinese investors, Goldman Sachs suggests the following points when making cross-border asset allocations:
- Diversify Currency Risk: Avoid all positions denominated in US dollars; allocate some yen and Indian rupee assets to hedge against single-currency fluctuations.
- Choose Low-Barrier Tools: Use ETFs for cross-market allocation, such as ETFs tracking the Tokyo Stock Price Index (TOPIX), the Nifty 50 ETF, or global tech ETFs, to reduce stock-picking risk.
- Dynamic Rebalancing: Adjust allocation quarterly based on valuations and fund flows. When US stocks are overvalued, moderately reduce positions and shift to undervalued markets.
- Watch Currency Hedging: The yen's recent depreciation benefits Japanese exports but may erode exchange gains. Consider currency-hedged ETFs or invest directly via foreign currency accounts.
Conclusion: Global Rotation in Full Swing
Goldman Sachs' report once again reminds investors that no market wins forever. While US stocks boast the strongest innovation momentum, high valuations already reflect most positives. As Fed policy shifts and the global economy diverges, shifting some funds to growth-potential, reasonably valued markets like Japan and India can effectively enhance long-term returns and reduce volatility. For Chinese investors, using ETFs and dynamic rebalancing strategies can more steadily capture the opportunities of global sector rotation.
(This article is for reference only. Investing involves risk. Please make decisions with caution.)
