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There’s a lot of noise right now about tech valuations being too stretched. You’ve probably heard the same talking points — people saying the bubble’s about to pop, that these stocks are trading at ridiculous multiples and that it’s only a matter of time before reality catches up.
But the data tells a completely different story.
When I dug into the numbers recently, I found something that genuinely got me excited. The Magnificent Seven stocks — minus Tesla (TSLA) — now have an average forward price-to-earnings ratio that’s actually lower than consumer staples names.
Let that sink in for a moment.
Your average staples stock has a higher P/E ratio than the biggest tech stocks in the world. That’s not normal. And historically, when this kind of valuation crossover happens, it’s been a signal worth paying attention to.
These crossovers are rare. They’ve only appeared a handful of times over the past several years — at the end of the 2022 bear market, again during a similar setup in 2025 and once more this year.
Each of those periods marked points where tech valuations compressed to the level of defensive sectors, creating a moment investors don’t typically get for long.
When Tech Gets This Cheap, History Has a Clear Message
Every time tech valuations have closed in on staples like this, it’s set up a buying opportunity. Tech has shown over and over that it rebounds and climbs back toward its more typical premium multiples. Right now, these stocks are trading at a discount that’s unusual relative to their historical norms.
Could there be more downside? Sure. But historically, not a whole lot more — tech rarely trades below 20x earnings, and we’re sitting at 23.5x forward earnings. When valuations compress to this degree, it tends to be a window rather than a long-term condition.
That’s why this moment stands out. For investors who look for asymmetric opportunities, valuation convergence between high-growth tech and low-growth staples has consistently offered favorable risk-reward.
Why This Changes My Outlook on Rotation
I’m not saying the recent rotation into the Dow didn’t create opportunities. Companies like General Electric (GE), Howmet Aerospace (HWM) and Caterpillar (CAT) were awesome to trade during that move.
But that rotation never felt like the final chapter.
Tech’s story isn’t done. The Nasdaq 100 (QQQ) looks primed to attract capital again, and I think money’s going to come right back in. If history is any guide, in a couple of months we’ll probably hear people talking about the rotation all over again — but this time, the narrative will center on money moving back into tech.
This is the kind of valuation setup that gets me excited. When the dominant narrative is focused on overvaluation, yet the actual numbers show tech trading at a discount relative to staples, that disconnect is where opportunity tends to live.
If you’ve been waiting for a clearer signal on tech, this is one worth considering. The valuation premium is gone — and historically, moments like this haven’t lasted long.
Graham Lindman
Graham Lindman Trading
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