On Nov. 4, 2025, fears of a crash gripped Wall Street as the CEOs of Goldman Sachs and Morgan Stanley warned that the market was due for a correction. At a financial summit, Goldman Sachs CEO David Solomon said that a drawdown of 10% to 20% over the next year or two was likely, while Morgan Stanley CEO Ted Pick said at the same conference that a 10% to 15% drawdown would be healthy.
All three major indexes plunged on their comments, with the tech-heavy Nasdaq Composite taking the most pain with a 2% dip. In the three months since, Wall Street appears to have internalized their warnings, with analysts seeming to comb through earnings reports for the major tech companies in search of signs that shares are overvalued.
Last month, for instance, Microsoft's (MSFT 0.73%) share price fell by 10% despite the company reporting a 60% year-over-year jump in profits, partly because analysts thought that the 39% year-over-year growth of its cloud services segment was too low. The next week, traders punished Amazon (AMZN 1.52%) with an 8% haircut for missing its earnings estimates by $0.02 a share, with earnings per share coming in at $1.95 compared to the $1.97 expected.
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Concerns over these companies' robust spending plans on artificial intelligence (AI) infrastructure also played a role, and some tech giants like Meta Platforms (META 2.52%) rose on well-received earnings reports. But overall, it seems that big tech is on probation with Wall Street.
Three months later, how are tech stocks doing?
Since the CEOs issued their warnings, the Nasdaq slid from 23,349 on Nov. 4 to 23,031 at market close as of Friday, Feb. 6. That's a 1.4% decline over three months.
As of now, the correction hasn't come. To be fair, the CEOs forecast that it might take a year or two. Anything is possible -- after all, corrections of 10% have happened on average once a year since 1950, while 20% corrections happen about every three to five years.
So with that historical perspective, these correction warnings shouldn't have rattled Wall Street. And as for overvaluation fears, I would argue that tech stocks have been "on probation" with Wall Street long before the CEOs spoke up.
After all, as far back as August, shares of Nvidia (NVDA 1.53%) took their lumps when its data center revenue for Q2 came in at $41.1 billion, rather than the $41.3 billion that analysts had expected. This $200 million shortfall, out of $41.3 billion expected, meant Nvidia missed the data center revenue projections by less than half a percent. Higher-than-expected earnings and revenue didn't redeem the company in analysts' eyes; shares slid 5% the day after the report.
A sign there's no tech bubble
To me, market activity like this seems like anti-bubble behavior. Market bubbles, or times of dangerously inflated valuations, develop when investors and analysts become so giddy with a trend's revolutionary potential that they turn a blind eye to warning signs like earnings misses or slowing revenue growth, waving them away as speed bumps on the path to even greater gains.
Since August at least, Wall Street has definitely not been in the mood to forgive any disappointments in tech stocks' earnings reports. Yet while the Nasdaq has retreated 1.4% over the last three months, plenty of its largest components have reported prodigious earnings growth. And according to FactSet, of the information technology companies that have reported Q4 earnings so far, 95% have beaten expectations.
When earnings rise, but share prices don't, valuations become more reasonable as price-to-earnings (PE) ratios fall. Sure enough, the average stock on the Nasdaq now carries a P/E ratio of 27.45, down from 34 a year ago.
Anything can happen in markets, and these CEOs' predictions may come true. But overvaluation fears around tech stocks look much less justified after this three-month lull of growing earnings and flat share prices. In a few months' time, I believe a lot of people look back on this window as a buying opportunity.
