“While tech-valuations remain elevated, they are far below dot.com bubble levels – with the added support of low rates today. We do not expect a significant sustained sell-off given the sector’s relative attraction. Nonetheless, volatility is expected to be elevated in the near term, analysts at Nomura Inc said in a report on 7 September.

Concurring, senior markets economist at Capital Economics, Oliver Jones says, comparisons with the dot com boom are overdone.

“Investors might be prepared to pay a premium relative to their recent earnings if they perceive that this process will continue. Their strong balance sheets have allowed them to weather the storm comfortably, while continuing to acquire would-be competitors while they are small (something the big tech firms have done on a grand scale over the past few years),” he said in a note 3 September.

According to Jones, big tech’s valuation premium has risen steadily for a few years, and is quite big. At the same time, it is clearly not in the same league as that of the IT sector when dot com mania was in full swing, the note added.

The five largest US tech companies – Alphabet, Amazon, Apple, Facebook and Microsoft are seen as the key relative beneficiaries of the pandemic, thanks to the shift to online spending. Now, their earnings account for nearly 15% of S&P 500 total. While their valuations have been a concern, last week’s sell-off was not due to any particular fundamental reason. Some technical analysts cite exuberant activity in the options market as a reason for the pull-back.

Meanwhile, Mark Eibel, director of client investment strategies at Russell Investments feels, it’s too soon to know if the sell-off could mark the beginning of a rotation into value stocks. However, in his note last week, he said that any positive news surrounding a COVID-19 vaccine could be good for cyclical areas of the market.