By Rose Henderson

(Bloomberg) — The technology sector is looking increasingly attractive for investors as valuations fall below those of the wider stock market, according to Goldman Sachs Group Inc. (GS) strategists.

Tech’s recent underperformance is starting to generate attractive opportunities as “its valuation, relative to expected consensus growth, has fallen below that of the global aggregate market,” the team led by Peter Oppenheimer wrote in a research note Tuesday.

Any lasting shock to the global economy from the war in Iran is also likely to benefit the sector as tech cash flows are less sensitive to economic growth, the strategists said.

Shares of tech companies hit record highs last October thanks to rapid revenue growth, booming profits and dominant market positions. Since then, they’ve fallen back on concerns about ballooning spending on artificial intelligence — the largest cloud computing companies have committed to spend over $700 billion on data centers — and a rotation into sectors with less stretched valuations.

Investors are worried about the scale of returns on such large commitments, but also the potential disruptive impact of artificial intelligence on existing business models, Oppenheimer said. A reliance on expanding computing power also means future growth is increasingly dependent on the physical world, he said.

“Old-economy” stocks were re-rated as investors anticipated the increased infrastructure expenditure needed to boost energy supplies and support the data center build-outs. A Goldman Sachs basket of capital intensive “HALO” stocks , including utilities and manufacturing, has gained 11% year-to-date.

“These factors have opened up an opportunity in the technology sector where growth rates remain strong, but valuations are now low,” Oppenheimer said. Tech stocks have seen strong earnings and positive earnings revisions, and return on equity has remained high, Oppenheimer added.

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