Tech Stocks Are Trading as If ChatGPT Never Happened, Data Shows
Key takeaways
- Tech valuations have slipped back to pre‑ChatGPT levels, raising questions about whether AI‑driven earnings growth is still credible.
- S&P 500 IT sector 18.2× forward earnings (Nov. 2)
- S&P 500 18.2× forward earnings (Oct. 30)
- XLK fell 2.9% to $174.22
What happened
Tech stocks are trading at levels that ignore the impact of ChatGPT, with the S&P 500 Information Technology sector priced at 18.2× forward earnings—back to October 2022 levels—while the broader market also sits at 18.2×. The State Street Technology Select Sector SPDR Exchange-traded fund — a basket of stocks or bonds you can buy like a single share.ETF
Why it matters
The drop in tech valuations comes despite earnings estimates rising, suggesting investors are questioning the sustainability of AI‑driven growth. Semiconductor earnings are projected to jump 114.3% this year and 77.9% by 2027, yet the sector trades at only 13.5× forward earnings versus 18.5× for the S&P 500,…
Short-term and longer-term
Short-term. Over the next few days, watch for earnings releases from Alphabet and Intel, as well as any updates on Marvell’s Lumentum integration.
Longer-term. For investors looking ahead, the current discount could represent a long‑term opportunity if AI‑related earnings growth materializes as projected.
Words on this card
- Forward P/E
- The price of a stock or index divided by its earnings forecast for the next 12 months
- ETF Learn
- An exchange‑traded fund that tracks a basket of stocks
- Capex
- Capital expenditures, the money a company spends on equipment and facilities
- AI
- Artificial intelligence, computer systems that can learn and perform tasks
- Chipmaker
- A company that designs and manufactures semiconductor chips
- Revenue
- Sales — money the company took in before costs.