Global Courant
The skyrocketing valuations in tech stocks driven by the promise of artificial intelligence aren’t that “extreme” when looking at past innovation cycles. Data analyzed by Empirical Research Partners shows that the steep valuations achieved by popular AI-powered names propelling the market upwards in 2023 seem meager compared to the high valuations seen during the height of the mainframe era in 1969 , the PC boom in 1983, and the Internet boom in 2000. “The relative forward P/Es of current AI leadership are still a long way from what was seen at the peaks of previous waves of innovation,” said managing partner Michael Goldstein in a note from Tuesday. are close to the levels reached a year before the tops.” NVDA YTD mount Nvidia shares in 2023 This is true even for Nvidia, up 169% this year and a forward P/E multiple of about 52 times as investors betting on the AI potential. To reach this conclusion, the company examined future price-to-earnings ratios and free cash flow yields within the technology sector during the peak of each of these cycles. For AI, he examined interests within the Roundhill Generative AI and Technology ETF (CHAT), including Nvidia, Microsoft, Alphabet, Baidu and more. While valuations for these stocks appear “rooted in reality,” Goldstein noted that a correction is not out of the question. “The combination of record-breaking relative returns and the elevated Equity arbitrage risk suggests it won’t take too much to make a correction, but overall stock valuation doesn’t seem excessive yet,” he wrote. — CNBC’s Michael Bloom contributed reporting
AI valuations are not as high as previous waves of innovation,
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