Deutsche Bank upgrades US tech stocks to overweight after $2tn Nasdaq selloff

Why the upgrade happened

Deutsche Bank’s chief strategist, Binky Chadha, and strategist Parag Thatte described the October 9 downgrade of US technology stocks to neutral as a "short-term call," warning at the time that risks outweighed rewards. Three weeks later, the bank reversed its stance, upgrading the sector to overweight.

The decision follows a selloff that erased over $2 trillion from the Nasdaq 100 in October. Large tech and growth stocks fell about 11% during this period, while the rest of the S&P 500 rose almost 6%, leaving tech stocks near the bottom of their long-term range against the broader market.

The strategists believe the selloff has created a buying opportunity, as much of the risk tied to AI—such as slower investment or overcapacity—is already reflected in share prices. They noted that investors hold relatively few tech shares despite solid earnings growth.

Market performance and historical trends

Alphabet’s shares dropped more than 12% after its latest earnings report, contributing to the broader tech sector’s decline. However, Deutsche Bank’s analysis suggests that similar selloffs in recent years have often been followed by strong rebounds.

The bank’s data shows that after past swings back into tech, the sector gained an average of 32% and outperformed the rest of the S&P 500 by about 30 percentage points. This historical trend informed the decision to upgrade the sector.

Risks and uncertainties

Despite the upgrade, Deutsche Bank flagged several risks that could weigh on tech stocks. These include potential new regulations targeting the sector after the US midterm elections and broader geopolitical crises. The strategists cautioned that a major market shock could still push shares lower.

The bank also noted that while earnings growth in tech has been solid, investor positioning remains cautious, suggesting that sentiment could shift quickly if risks materialize.

What this means

Lazyfounder analysis — our interpretation, not reported fact.

Deutsche Bank’s reversal on US tech stocks is a signal for founders and operators to watch sector-specific volatility closely. The upgrade suggest that despite short-term risks—such as regulatory pressures and geopolitical instability—long-term opportunities may emerge from the recent selloff. For Indian startups and investors with exposure to US tech, this could indicate a moment to reassess strategies, particularly if they rely on US-based cloud services, SaaS platforms, or semiconductor supply chains.

However, the bank’s cautious tone on risks underscores the need for agility. Startups in emerging markets often feel the ripple effects of US tech sector fluctuations, whether through funding environments, currency exchange rates, or shifts in global investor sentiment. Founders should weigh the potential for a rebound against the possibility of further downturns, especially if broader economic or political shocks occur.

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