Tech Megacaps Defy Gravity as Yields Rise, But Snapback May Be Coming

A handful of megacap tech stocks are propping up the S&P 500, but their valuations look stretched compared to rising bond yields.

The so-called Magnificent Seven - Apple, Microsoft, Alphabet, Tesla, Amazon, Meta, and Nvidia - now make up nearly 30% of the S&P 500's market cap.

Their forward P/E ratios have ballooned from 29 to 45 in 2022, despite yields climbing to pre-2008 crisis highs.

Higher yields typically pressure tech stock valuations, but the Magnificent Seven have defied that relationship.

Some strategists expect tech valuations and yields to "snap back" into alignment, likely driven by falling stock prices.