The Ghost of Tech Stocks Past

Great article comparing the top tech stocks of the late 90s (Intel, Cisco, Microsoft, Oracle) to the top tech stocks today (Facebook, Apple, Amazon, Microsoft, Google), and how index funds might be overexposed to big tech.

Unlike the late 90s, you can justify the valuations. While these names are unlikely to show up on a deep value screen, there is a big difference between today and yesterday. These five have earned nearly half a trillion dollars over the last five years and are currently trading at 37x earnings and 5.5x sales. The four in the late 90s were trading at 100x earnings and 26x sales.

What has people concerned today, among many things, is that Facebook, Amazon, Apple, Microsoft, and Google, are becoming an increasingly larger part of the stock market. Five years ago these stocks represented 8% of the S&P 500. Today that’s grown to 17%.

I’m not suggesting that tech stocks are cheap just because they look like a bargain compared to the dotcom bubble. The dotcom bubble makes everything look like a bargain. But I also don’t think it makes sense to compare them to that time period and then conclude that a dotcom like collapse is coming either.

Thoughts?