Observed Signal · May 8, 2026 · Earnings Report · Source: CNBC Technology · Impact: 4/5 · Sentiment: Positive
Tech stocks offer best value after strong earnings
U.S. technology stocks have become more attractively priced following a strong earnings season, with Morningstar finding the AI investment theme trading at its largest discount since 2019. Analysts say robust earnings have helped tech firms "grow into" prior lofty valuations by expanding earnings, while earlier forward P/E ratios for the S&P 500 Information Technology sector peaked above 30x in October 2025 (FactSet). Capital expenditure among the largest tech companies — the so‑called "Magnificent Seven" — is tracking near $725 billion for 2026, above prior expectations, according to Saxo Bank. Some investors remain cautious about whether hyperscalers can sustain elevated capex and supranormal returns indefinitely, and BNP Paribas Asset Management flagged potential operational constraints in AI adoption tied to available model processing tokens. The article was published May 8, 2026 by CNBC reporter Joseph Wilkins.
Sector-level earnings and valuation shifts affect investment flows, capex expectations (cloud, data centers, semiconductors) and demand drivers relevant to technology and advertising infrastructure; earnings-season signals from major tech firms have material implications for industry budgets and supplier ecosystems.
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Key Takeaways & Evidence Grounding
- Published May 8, 2026 by CNBC reporter Joseph Wilkins
- Morningstar research: AI theme is trading at its largest discount since 2019 using a price-to-fair-value metric
- FactSet: forward P/E for the S&P 500 Information Technology sector exceeded 30x in October 2025
- Saxo Bank: combined 2026 capital expenditure for the "Magnificent Seven" is tracking around $725 billion (vs. ~$670 billion previously expected)
- Analysts quoted include Morningstar's chief equity strategist Michael Field, Dan Kemp (founder, Portfolio Thinking), Sophie Huynh (portfolio manager, BNP Paribas Asset Management), and Kriti Gupta (global investment strategist, J.P. Morgan Private Bank)
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Are Tech Stocks Cheap?
This a16z analysis reviews market data and charts arguing that technology and software stocks may be cheaper than they appear: although tech earnings still trade at a roughly 25% premium versus the broader market, that premium has collapsed from prior levels even as tech earnings forecasts and upward revisions for 2026 have climbed fastest among sectors. The piece cites Goldman Sachs Research, BlackRock and insider-buying data (State Street Tech ETF / XLK). It also describes an AI experiment showing LLMs are more pro-activist in proxy fights than traditional advisors and highlights institutional shifts — e.g., JPMorgan Asset Management’s in‑house Proxy IQ — that could alter proxy voting dynamics. Additional sections summarize increasing quantifiable AI benefits in enterprise surveys, long-term declines in global oil intensity, and a local NYC grocery project costing $30M.
Santoli: AI's Youthful Phase Over, Investors Face New Reality
CNBC's Mike Santoli argues that the 'youthful phase' of AI investing, characterized by unlimited promise and easy winners, is over. Semiconductor stocks have fallen 20% from June highs, and the S&P 500 tech sector's forward P/E has contracted from 29 to 21. The narrative has shifted from opportunity to risk, with public sentiment turning against AI and concerns about data center overbuilding. However, the purge of speculative excess may reset sentiment and prevent a 1999-style bubble. The article draws parallels to the late-1990s tech boom, noting Fed rate hikes and rising Treasury yields. A potential silver lining is that a slowdown could allow major AI capex spenders like Microsoft, Alphabet, and Meta to consolidate before further investment. The market is rewarding companies with strong free cash flow, as seen in the VictoryShares Free Cash Flow ETF's outperformance.
Big Tech AI Stakes Distort Earnings Picture
Major technology companies have reported large, mark-to-market investment gains from private AI firms Anthropic and OpenAI that have materially inflated headline corporate earnings this quarter. Microsoft, Amazon and Alphabet booked sizeable equity gains — in some instances driven also by SpaceX — which LSEG says lifted S&P 500 earnings growth to about 48% year-over-year; excluding those private-investment gains aggregate growth falls to roughly 29%. Analysts and sell-side researchers note these are accounting gains that don’t reflect underlying operating performance, and many analysts exclude such items in non-GAAP views. The dynamic has produced larger-than-usual earnings beats and highlights how mega-cap tech stakes in private AI companies can skew market signals ahead of potential IPOs for those startups.
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