Tech Stocks Approach Bubble-Era Valuations
Tech companies account for more than a fifth of the S&P 500’s valuation, but analysts say a replay of the crash is unlikely.

Computer and software stocks account for more than a fifth of the value of the S&P 500 – a near-15-year high. Strong revenues make a replay of the 2000 dot-com crash unlikely.

A Bloomberg News report delivers the following insights:

  • “Tech is one of the only industries where earnings continue to expand.”
  • “Gains are built on earnings, driven by demand for products such as Apple’s iPhone and Google’s web ads.” The S&P 500’s tech stocks are expected to expand profit by 2.8 percent in the third quarter.
  • “Information technology accounted for about one-fifth of the S&P 500’s operating earnings in the 12 months through March, almost precisely its market weight. 

Since 2015, investors have favored tech companies chasing revenues instead of user growth, which helps to differentiate today’s gains in the sector from the rally that ended with a crash in 2000.

“It’s healthy growth,” Bloomberg quoted Rich Weiss, a Los Angeles-based senior portfolio manager at American Century Investments, as saying. “I don’t believe we need to worry about a tech bubble here or in the near future.”

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