Tech Forward P/E Falls 30% as Expected Earnings Jump 80%
Updated
Updated · Yahoo Finance · Aug 16
Tech Forward P/E Falls 30% as Expected Earnings Jump 80%
3 articles · Updated · Yahoo Finance · Aug 16
Summary
Tech's forward price-to-earnings ratio dropped about 30% from a year earlier at its July low even as the S&P 500 sat near a record high and tech shares kept climbing.
Roughly 40% price gains were outpaced by about 80% growth in expected earnings, leaving investors paying less for each dollar of forecast profit despite higher stock prices.
XLK's rebound from its March 30 low marked its strongest 45-day surge since 1999, while the PHLX Semiconductor Index posted its second-strongest such run since 1994.
That cheaper valuation holds only if projected profits materialize, with Big Tech's heavy AI spending on chips, data centers, networking and power now under close scrutiny.
If AI capacity is overbuilt, customer spending slows or the economy hits tech budgets, analysts could cut forecasts and push valuations back up without any further rise in share prices.