Apple , Microsoft , Amazon.com , Nvidia , and Tesla are down between 9% and 14% from their 2023 peaks, after having seen double-digit gains during the first seven months of the year. Alphabet and Meta Platforms , down 3% and 6%, respectively, have been hit less hard.
Enter the bull case. It starts with the fact that the rise in yields is likely to slow down from here. They just can’t keep rising at the same pace, particularly because they’re already reflecting the Federal Reserve’s plan to keep rates higher for longer. A drop in yields, of course, would lift tech stocks—and the entire stock market, for that matter—but even just a slower increase would be helpful.
That’s because of earnings. Net income for the group is expected to rise about 20% in 2024, with profit forecasts rising since the end of March, according to FactSet, as analysts caught up to the realities of artificial intelligence. It’s all seen in the group’s PEG ratio—its price/earnings multiple divided by its earnings growth. Analysts for the group, in aggregate, expect long-term annual earnings-per-share growth of about 20.7%. The 27 times multiple over next year’s EPS is about 1.3 times that growth, lower than the median 1.9 times PEG ratio for the other 493 S&P 500 stocks.