The Magnificent Seven tech giants are experiencing their worst start to the year since 2020, and Goldman Sachs traders believe that macroeconomic uncertainty is transforming into micro-level performance concerns.As of March 31, Goldman Sachs data shows that tech stocks faced massive sell-offs last week, bringing the sector's exposure (net positions and total positions) close to multi-year lows. March was a nightmare for tech stocks, with the Nasdaq index dropping about 8% in March, marking the worst monthly performance since December 2022, and the quarterly decline also reached about 8%, the worst quarter since the second quarter of 2022.Goldman Sachs traders believe that the current decline in tech stocks is no longer solely attributed to heavy positioning or high valuations (at least among large tech stocks), but is caused by several key factors:<blockquote>First, there are concerns about the outlook for IT spending, with several companies (such as Accenture and PATH) issuing warning signals, and Goldman Sachs' research department also noted that demand in the security software industry is stable but showing negative trends.Second, the uncertainty surrounding the government's efficiency department's DOGE plan to cut $1 trillion in spending by the end of May has increased.Additionally, declining consumer confidence is impacting the internet sector (advertising, e-commerce, and travel),Moreover, tariffs are exacerbating the impact on cyclical stocks, all of which are putting pressure on the tech sector.</blockquote><h2>AI Hype Cools, Investors Shift to Conservative Stance</h2>Goldman Sachs trader Peter Callahan believes that the fundamentals of tech stocks have not changed much in the past week or two, but investor sentiment has turned conservative, and they are beginning to consider more factors:<blockquote><ul><li>The impact of economic slowdown on earnings season;</li><li>Timing/linear issues (economic fluctuations at the end of the quarter);</li><li>Macroeconomic issues starting to affect micro-level performance and guidance.</li></ul></blockquote>Goldman Sachs believes that even if investors believe tech stocks will eventually &#34;land safely,&#34; such as improved policy impacts or successful AI investments, the unpredictability of the future makes it difficult for investors to withstand pressure.Clients' primary concerns are focused on the outlook for earnings season. The current market environment presents a &#34;you win, I lose&#34; situation:<blockquote><ul><li>If companies miss earnings or lower guidance due to macro impacts, then &#34;bad news is bad news&#34; (as seen in the Jefferies or SNX cases)</li><li>If companies do not take macro issues into account (do not lower guidance), investors may think that the companies have not yet felt economic pressure (as seen in the Accenture case)</li></ul></blockquote>This has led investors to adopt a cautious attitude towards tech stocks, leaning towards defensive choices, but not completely shifting to a &#34;recession&#34; mode. Goldman Sachs recommends:<blockquote><ul><li>Maintaining low total positions and low net exposure in the TMT sector;</li><li>Shifting towards defensive quality stocks;</li><li>Patiently waiting for opportunities to enter favorite targets, even if the sentiment is not great;</li><li>Being more flexible in the short positions of the portfolio</li></ul></blockquote>

Goldman Sachs believes that the current decline in technology stocks is no longer solely attributed to heavy positioning or high valuations, but is caused by multiple factors, such as the uncertainty surrounding the DOGE trillion-dollar reduction plan, declining consumer confidence, and the intensified impact of tariffs on cyclical stocks. Therefore, although the fundamentals of technology stocks have not changed significantly in the past week or two, investors' styles have shifted to a more conservative approach, also beginning to consider the impact of macroeconomic growth slowdown on the earnings season

- The technology sector is experiencing its worst start to the year since 2020, with macroeconomic uncertainties affecting micro-level performance.  
- Goldman Sachs reports significant sell-offs in tech stocks, with the Nasdaq index dropping about 8% in March, marking its worst monthly performance since December 2022.  
- Concerns over IT spending, government budget cuts, and declining consumer confidence are pressuring the sector, leading investors to adopt a more cautious approach while maintaining a defensive stance.

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Is the tech stock sell-off far from over? Goldman Sachs traders: Macroeconomics is starting to interfere with micro performance guidance, and AI investments are unlikely to yield significant results in the short term