Bank of America (BAC) strategists say that the rally in U.S. Big Tech stocks still has room to run, even though valuations already look high. Indeed, Michael Hartnett and his team studied 10 major equity bubbles over the past century and found that, on average, markets gained 244% from low to peak. The Magnificent Seven—Tesla (TSLA), Alphabet (GOOGL), Apple (AAPL), Meta (META), Amazon (AMZN), Microsoft (MSFT), and Nvidia (NVDA)—have risen 223% since March 2023, which suggests that they could keep climbing before this cycle runs its course.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
And current numbers back up this view. In fact, stocks often peaked with trailing price-to-earnings ratios around 58 and traded nearly 30% above their 200-day moving average during past bubbles. For reference, the Magnificent Seven currently have a P/E ratio of 39 and are about 20% above that average. Investors have also shown steady demand throughout the year despite setbacks, such as concerns over the Chinese AI firm DeepSeek or trade policy headlines, which have done little to cool enthusiasm.
Instead, buyers have continued to step in during pullbacks. Interestingly, several factors are supporting this momentum, such as the excitement around artificial intelligence, expectations for Federal Reserve rate cuts, and a generally supportive economic backdrop. In addition, Hartnett pointed out that bubbles can be short and intense, just as they were in 2000 when tech stocks soared 61% in six months while most other sectors fell.
Which Tech Stock Is the Better Buy?
Turning to Wall Street, out of the Magnificent Seven stocks, analysts think that MSFT stock has the most room to run. In fact, MSFT’s average price target of $626.88 per share implies more than 22% upside potential. On the other hand, analysts expect the least from TSLA stock, as its average price target of $323.94 equates to a loss of 23.8%.
