As the Q2 corporate earnings season begins, investors will gauge whether earnings confirm elevated technology stock valuations. According to Bloomberg data, almost 25% of technology stocks in the Nasdaq 100 Stock Index ($IUXX) (QQQ), including Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA), are priced at ten times sales or more. That compares to the index’s average of about five times.
Although tech stock valuations are frothy, they remain below those during the Covid-19 pandemic and the dot com bubble of the early 2000s, when price-to-sales ratios soared as investors piled into stocks. The artificial intelligence craze is a major factor fueling demand for technology stocks. Laffer Tengler Investments said, “We’re not at peak earnings yet for these companies,” on expectations that the biggest technology and internet stocks are best positioned to capitalize on the demand for artificial intelligence products.
