Analyst: After an outstanding earnings season, technology stocks are expected to present the best investment value in years

Source: Global Market Report

After another round of impressive earnings season, U.S. tech stocks have once again become market favorites, and Morningstar's analysis points out that the sector currently offers the best allocation value for investors in years.

Between 2024 and 2025, the market has repeatedly expressed concerns about a potential bubble brewing in the leading U.S. equity sectors. Driven by the hype surrounding artificial intelligence, the valuations of the "seven major U.S. technology giants" have continued to soar.

According to financial data company FactSet, this valuation frenzy peaked in October 2025, when the forward P/E ratio of the S&P 500 Information Technology sector briefly surpassed 30 times. However, in subsequent earnings seasons, strong results boosted the denominator (E) in the P/E formula, with tech stocks using earnings growth to digest high valuations, thereby lowering the overall valuation multiples.

Morningstar research shows that the current valuation discount for the AI-themed sector has reached its largest level since 2019.

Morningstar's Chief Equity Strategist Michael Field stated that, based on the company's proprietary price-to-fair value ratio, now is an excellent entry point for the technology sector.

Field said: "AI is not an imminent bubble; its underlying fundamentals are very solid."

"Semiconductor demand continues to exceed expectations, and core growth drivers such as data centers and infrastructure remain intact. AI still has upside potential, and investors should seize the opportunity while it remains."

Morningstar research notes that the volatility in the U.S. equity market in early 2026 led AI stocks to retreat from historically high valuations, and the most impacted related stocks have since become available at more attractive price levels.

According to Saxo Bank data, the 'seven major U.S. technology giants' raised their 2026 capital expenditure plans after impressive earnings updates in April, with a combined capital expenditure now forecasted to reach $725 billion, higher than the market's previous estimate of about $670 billion.

The all-purpose track: Tech stocks encompass every investment logic

However, some analysts remain skeptical about whether large cloud tech enterprises can sustain their current astonishing levels of capital expenditures in the long term.

Dan Kemp, founder of the investment advisory firm PortfolioThinking, told CNBC in an interview:

"In the past, it was hard for us to believe these companies could sustain such high growth rates and generate such profits; today, it's equally hard to believe that their high growth could ever come to a halt."

He believes that investors need to have extremely strong confidence to assume that these companies can continue to earn excess returns without them being diluted by market competition—which does not align with the usual rules of capital markets.

The core logic supporting strong profit growth for tech enterprises lies in the fact that artificial intelligence is a long-term structural trend, enabling it to decouple from booms and busts in the economic cycle.