Goldman Sachs' latest research reveals that the collective valuation of Apple Inc. (AAPL, Financial) and its peers, known as the "Tech Giants," has reached its lowest level in seven years. The group, which includes Alphabet, Amazon, Meta, Microsoft, Nvidia, and Tesla, currently trades at a forward price-to-earnings ratio of 28 times. This represents a 43% premium over the S&P 493 index's 20 times, placing this premium in the 30th percentile over the past decade.
Goldman Sachs strategist David Kostin suggests that several factors might drive a recovery in these stocks. These include lighter portfolio allocations in the short term, cheaper valuations compared to the past two years, and renewed enthusiasm for AI following first-quarter earnings. However, risks persist, such as ongoing antitrust investigations by Western authorities into Alphabet, Apple, Microsoft, and Meta. Competitive news like Apple's AI search ambitions, which caused a 7% drop in Alphabet’s stock in a single day, underscores the internal vulnerabilities of this group.
