Discussion
Tech Valuations Back to Pre-AI Boom Levels
m101: Except they are fundamentally different companies now. Now they have no free cash flow and they are extremely capital intensive industrial businesses.Another note is that this is on forward earnings. What may have just happened is analyst expectations on forward earnings have caught up what markets prices earlier. Forward earnings generally lag pricing, this happens on the way up, and on the way down..
sfblah: Must be using some strange definition for tech or valuations, because last I'd heard tech was some huge percentage of the S&P 500, and the index has dropped like 10% from its ATH.
jjmarr: The definition is the first sentence of the post:> The chart below compares the forward P/E ratios for the S&P 500 and the S&P 500 Information Technology sector.> Tech valuations have compressed from 40x to 20x, and we are back at levels last seen before the AI boom beganForward PE is the ratio of stock price to anticipated earnings.If it's higher, then investors are predicting future growth in a company.
kaycebasques: Aside: why are Alphabet and Meta bucketed into the Communications sector rather than the IT one? Meta kinda makes sense, but Alphabet much less so.Are there any other notable IT companies that aren't actually part of the S&P500 IT sector?Edit: Apparently this happened in 2018 and is known as the de-FAANGing of the IT sector. I.e. FAANG used to all be lumped in a single sector. ^SPX tried to redistribute to spread the companies across different sectors. AMZN is another notable company now outside of IT sector. https://en.wikipedia.org/wiki/Communication_services_sector_...
trueno: good point, i think it'd be valuable to bring in more of these companies to this chart. with it narrowly scoped here it's perhaps (likely) not telling the full story. i would imagine theres plenty of ballooned valuations still because of AI
kaycebasques: This also means that the pre-2018 index had a fundamentally different portfolio of companies. So comparing today to anything pre-2018 is apples-to-orangesI recall that there's an "extended tech" ETF that does a pretty good job of actually capturing the whole IT universe. Pretty sure I'm thinking of IGM: https://www.ishares.com/us/products/239769/ishares-north-ame...
tamimio: AI isn’t a hype anymore, average non technical people hate AI and would rather not to interact with, and tech companies started to realize that AI won’t be the solution for all of their issues, but they still used it as a scapegoat to lower wages regardless. I even noticed now companies are back to ~2022 time in hiring either FT or consultation, from my experience.So hopefully soon we will have dirt cheap prices for ram and other chips.
aduwah: In the meanwhile my big bad corp measures AI usage as a performance KPI
shimman: No one said corporations were smart or self preserving, they're just a money vein for the elites to suck on until they get swatted away.
deadbabe: That’s easy to game. You just burn tokens.
