Tech is way overpriced and everyone else is way too cheap

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The BIS notes that the rise in tech valuations driven by the “Magnificent 7” has raised concerns about excessive optimism, echoing the late 1990s

Over the past few years, equity prices have risen steadily, driven largely by the “Magnificent 7” (M7) tech giants. While their earnings growth has been strong, the rapid rise in their stock prices raises concerns about whether these valuations are driven by excessive optimism about future earnings, potentially echoing the dotcom bubble of the late 1990s.icon

The parallel with the dotcom bubble might seem fitting, as both periods saw a surge in the tech sector’s share of the S&P 500 market capitalisation (Graph B1.A). In 2000, at the cusp of the dotcom bubble, the share of tech firms in the S&P 500 index reached 47%, doubling from 23% in less than two years. By end-August 2024, the share of tech firms had reached 49%, but the increase was more gradual, taking nearly a decade to double. These patterns reflect the overall dynamics of equity prices, with the S&P 500 tripling in real terms from 1995 to 1999, compared with a more gradual tripling over the past decade.

https://www.bis.org/publ/qtrpdf/r_qt2409w.htm

MarketWatch highlights fears that tech stocks are in the “5th mania in 100+ years,” with valuations at extremes

https://www.morningstar.com/news/marketwatch/20250127500/tech-stocks-plunge-as-wall-street-fears-stretched-valuations-will-value-stocks-win