On Nov. 30, 2022, OpenAI, a little-known San Francisco startup, released a chatbot named ChatGPT. Within months, it had triggered the largest technology spending cycle in a generation.
Almost four years later, Wall Street is valuing tech stocks as if that day never came.
The S&P 500 Information Technology sector now trades at 18.2 times expected earnings for the next 12 months, according to LSEG Datastream data compiled by Yardeni Research as of Nov. 2. That multiple is back to where it stood in October 2022, a month before ChatGPT's launch. In late 2025, it was above 30.
It is also no longer a premium. Yardeni Research puts the forward P/E of the whole S&P 500 at the same 18.2, as of Oct. 30.
So is this a historic discount opportunity, or the first signal that the AI bubble is bursting? The answer, annoyingly, depends on who you ask.
Prices Fell. Earnings Did Not.
Here's the part that makes this selloff weird: prices fell while earnings estimates kept climbing.
The State Street Technology Select Sector SPDR ETF (NYSE:XLK) fell 2.9% on Monday to $174.22, leaving it 14.3% below its record high.
The VanEck Semiconductor ETF (NASDAQ:SMH) is down 24.3% from its peak, deep in bear-market territory. The Nasdaq 100 is 10.8% off its record.
However, XLK is still up 19.6% this year. The stocks have risen less than the earnings behind them.
Chipmakers show the gap most clearly. Analysts expect semiconductor earnings to rise 114.3% this year and 77.9% in 2027, according to Yardeni Research. Yet the industry trades at just 13.5 times forward earnings, against 18.5 for the S&P 500.
That is a strange combination: booming profits and shrinking multiples. Normally you get one or the other.
Last Week Broke the Spell
The latest leg lower started with two earnings reports.
Alphabet Inc. (NASDAQ:GOOGL) fell 12.6% on Thursday after missing estimates on Search. On Friday, Intel Corp. (NASDAQ:INTC) plunged 28.6% after guiding fourth-quarter revenue well below consensus.
Hyperscalers and chipmakers together lost more than $800 billion in market value last week, according to a Bank of America Global Research report by Savita Subramanian. That is roughly the combined size of the 67 smallest companies in the S&P 500.
On Monday, a deal unsettled investors further.
Marvell Technology Inc. (NASDAQ:MRVL) agreed to buy Lumentum Holdings Inc. (NASDAQ:LITE) for $115 billion in stock. Lumentum makes the lasers that move data inside AI data centers, which are sold out through 2028, according to the company. Marvell fell 12.7% and Lumentum 18.6%.
When the buyer and the seller both get hammered, you know the market is in a mood.
The Case for a Discount
Nvidia and Broadcom both trade at less than 10 times their expected 2028 earnings, Cantor Fitzgerald semiconductor analyst C.J. Muse said in a note this week.
Bank of America semiconductor analyst Vivek Arya sees the cheap multiples as an opportunity. In a report this week, Arya and his team said capex cuts could lower peak profits but keep computing power scarce, extending the AI cycle and supporting higher multiples over time.
In their view, the chip index's 10% discount to the S&P 500 already prices in doubts about how long earnings can last.
In other words, the market has already done the worrying for you.
The Case for a Burst
The same Lumentum deal also raised the bearish question.
Muse said the sale raises the question of whether Lumentum's leaders "don't believe in sustainability of the AI infrastructure cycle." The all-stock structure could suggest the opposite, he said, but it is unclear why Lumentum is selling now.
Dennis DeBusschere of 22V Research sees a second problem. Third-quarter capex came in light at Alphabet, Microsoft and Meta, while 2027 estimates require a steep step-up from current spending rates.
He said "a violently flat range could last as long as the next 12 months" for broad AI baskets.
Flat and violent is not a fun combination for anyone holding the bag.
Or Maybe Neither
Jordi Visser of 22V Research rejects the bubble framing altogether. A bubble, he said, needs universal conviction, and this market has none. Instead, worried investors keep demanding higher yields and lower multiples to own the trade.
"Wider spreads are not the bubble bursting. They are the immune system working," Visser said in a note this week.
That is a nice way to put it. The market is not euphoric; it is suspicious. And suspicion, historically, is not what tops look like.
On Tuesday, chip stocks were rebounding in premarket trading. SMH rose 2.6% and XLK 0.5%.
A low multiple can mean two things. Either stocks are cheap, or the market doubts the earnings it is paying for.
Ed Yardeni has already chosen his reading. "Apparently, investors doubt the 2027 number," he said in a recent note.
So the next few months come down to a simple question: will the earnings show up? If they do, today's multiples will look like a gift. If they don't, the market was right to be suspicious all along.
