Tech Stocks Now Valued 270% Higher Than At Dot-Com Peak: Analyst Says Market Shows A 'Near-Total Disregard For Risk'

Investment firm Crescat Capital is sounding the alarm on the U.S. equity market, warning that “speculative complacency” has pushed valuations for top technology stocks to levels significantly higher than the 2000 dot-com bubble.

The research advocates for a “great rotation” out of overvalued AI-driven stocks and into countercyclical assets like gold miners, which they say offer superior growth at a lower price.

Tech Stocks Now Valued 270% Higher Than At Dot-Com Peak

The firm’s analysis highlights a stark valuation disparity. The enterprise value of the top 10 U.S. mega-cap stocks as a percentage of GDP has reached 76.8%, a figure 270% higher than the 28.4% peak reached by the top tech and telecom stocks during the internet bubble.

Kevin C. Smith, Crescat's Chief Investment Officer, stated that investing in major tech-dominated index funds at these levels “assumes that gravity no longer applies.”

Prefer Gold Miners Over Expensive Tech Stocks

Crescat argues that, unlike the over-leveraged AI stocks, large-cap gold miners present a compelling alternative with stronger fundamentals.

The median earnings per share (EPS) growth for major gold producers is 129.4%, vastly outpacing the 23.9% median growth of the “Magnificent 9” AI stocks. Simultaneously, the median price-to-earnings (P/E) ratio for these miners is less than half that of their tech counterparts, at 16.2 versus 38.2, respectively.

See Also: Gold Miners Remain Undervalued Despite Stellar Rally: Expert Says They Are Set To Post ‘Highest Profit Margins’ In History

Weakening Breadth, Lagging Transport Stocks Flash Red Flags

The report dismisses the common argument that today's tech giants are more fundamentally sound than their dot-com predecessors, noting that the top 10 tech firms in 2000 were also “highly profitable companies”. The core issue, Crescat contends, is not profitability itself but the extreme price investors are willing to pay for it.

Adding to the firm's bearish outlook are weakening internal market signals, including a bearish divergence in the Dow Jones Transportation Index and deteriorating market breadth, where a handful of mega-caps are holding up the major indices while the broader market softens.

Price Action

Here's a list of a few gold miners and gold miner tracking exchange-traded funds that investors could consider.

On Friday, the S&P 500 index ended 2.71% lower at 6,552.51, whereas the Nasdaq 100 index declined 3.49% to 24,221.75. Dow Jones also tumbled 1.90% to 45,479.60.

The futures of the S&P 500, Dow Jones, and Nasdaq 100 indices were trading higher on Monday.

Read Next:

• US Gold Reserves Hit 90-Year Low While Central Banks Worldwide Load Up On Yellow Metal: ‘Only A Matter Of Time’ To Rethink This Stance, Says Expert

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo courtesy: Shutterstock