The Tech Sector Is More Fractured Than the Headlines Suggest

If you only looked at Apple ($273.47, severity 0.1) and Nvidia ($193.16, severity 1.1), you'd think the tech sector is in great shape. Look deeper and the picture changes dramatically.

Across the 20 major tech stocks we track, 9 are in the red zone (severity 5+), 5 are in the yellow zone (severity 2-5), and only 6 are in the green zone (severity below 2). The sector is deeply divided, and the dividing line runs roughly between companies that benefited from pandemic-era growth and companies that didn't.

The Green Zone: Mega-Caps Holding Steady

Apple, Microsoft, and Nvidia all sit below severity 2. These are routine pullbacks within their normal historical ranges. Apple is practically at its all-time high of $275.25, sitting just 0.6% below the peak. Microsoft is 6.2% off its high of $542.07. Nvidia is 6.7% below $207.04.

These companies share a few characteristics: massive revenue bases, strong competitive moats, and exposure to the AI infrastructure buildout that has been the dominant investment theme.

Tesla (severity 1.3), Palantir (1.3), Shopify (1.9), and Broadcom (1.7) also sit in the green zone.

The Yellow Zone: Worth Watching

Meta sits at severity 4.0 with a 20.6% drawdown over 89 days. Coinbase is at 3.9, down 27.6% over 113 days. ARM Holdings, which went public to significant hype, is at 3.2, having been in drawdown for 490 days.

The yellow zone is where things get interesting for investors. These are above-average drawdowns that could either resolve (return to green) or deepen (cross into red). Meta's 20% drawdown, for example, is unusual for a company with Meta's revenue growth profile. Its average historical max drawdown is around 7%.

The Red Zone: Extended Structural Drawdowns

This is where the severity data gets striking.

Nine tech stocks are currently in the red zone (severity 5+). What they have in common is duration. These aren't flash crashes. Most have been declining for over a year, and several for over four years:

• PayPal (severity 17.2): Down 78.3% for 1,571 days. The longest and deepest drawdown in our tech coverage.
• Teladoc (severity 16.1): Down 97.5% for 1,738 days. Trading at $7.45 versus an ATH of $294.54.
• Unity Software (severity 12.2): Down 79.4% for 1,452 days.
• Super Micro Computer (severity 10.7): Down 68.2% for 609 days. A more recent collapse after an accounting controversy.
• Adobe (severity 9.1): Down 51.0% for 1,450 days. Arguably the most surprising name on this list given its dominance in creative software.
• Affirm (severity 8.5): Down 57.2% for 1,002 days. Another pandemic-era fintech that hasn't recovered.
• Intel (severity 6.8): Down 39.0% for 1,674 days. The longest drawdown period outside of TDOC.
• Salesforce (severity 5.8): Down 32.7% for 341 days.
• HP (severity 5.7): Down 33.1% for 352 days.

What's Driving the Divide

The pattern is clear when you look at the duration numbers. Almost every stock in the red zone has been declining since late 2021 or early 2022. That's when the post-pandemic repricing began.

The stocks in the green zone either weren't overvalued during the pandemic (Apple has always traded at more conservative multiples relative to its revenue) or found a new growth catalyst (Nvidia with AI chips, Palantir with government AI contracts).

The stocks in the red zone were priced for 30-40% annual growth in 2021 and are now growing at 5-15%. The valuation compression has been severe and sustained.

Adobe is a useful case study. The software is still dominant and growing. But at $276.85, it trades at a fraction of its $540+ peak because the market no longer applies the same multiple to its growth rate. The business didn't break. The valuation framework changed.

What the Severity Scores Tell You

For the mega-caps in the green zone, severity scores confirm what the price charts show: these are healthy, normal conditions. There's nothing unusual about the current drawdown depth for any of them.

For the red zone stocks, severity scores quantify something harder to see from price alone: how unusual the current drawdown is relative to each stock's own historical behavior. Intel has been through many drawdowns in its 40+ years as a public company, but the current one registers as a severity 6.8. Adobe has been through even more, and its current drawdown is a 9.1. These aren't typical declines for these companies.

Whether that represents opportunity or continued decline is a judgment call that depends on each company's fundamentals. The data can't make that call for you. But it can tell you precisely which stocks are experiencing historically unusual events right now, and by how much.