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Tech stocks cut forward P/E as expected earnings rise faster than prices
Technology’s forward P/E fell about 30% from a year earlier at its July low even as the sector’s 45-day momentum hit record levels.
A recent market snapshot from Yahoo Finance points to a notable shift in how investors are valuing tech: the sector’s forward price-to-earnings ratio fell roughly 30% from a year earlier around its July low, a magnitude previously seen around events like the dot-com bust and the financial crisis.
The article links the valuation drop to fundamentals moving ahead of share prices, saying technology prices were up about 40% over the past year while expected earnings rose about 80%. The result, in the writer’s example, is that higher expected earnings can lower the effective price investors pay per dollar of forecast profit even if stock prices keep rising.
Yahoo Finance also highlights momentum in exchange-traded tech exposure, noting that the Technology Select Sector SPDR Fund, XLK, had surged off its March 30 low and posted the strongest 45-day rate of change in its history since 1999.
The report extends the analysis to semiconductors, saying the PHLX Semiconductor Index was only surpassed by the March 2000 surge in 45-day data going back to 1994, and it flags the key risk around AI spending, where overbuilt capacity, weaker chip pricing, or cuts to corporate tech budgets could eventually pressure profit expectations.