GoKawiilU.S. tech stocks are back in vogue after another stellar earnings season, but Morningstar analysis suggests the sector offers the best value to investors in years.
Market chatter in 2024 and 2025 frequently referenced fears of a bubble emerging in the top end of the U.S. equity market, as the "Magnificent Seven" reached increasingly lofty valuations largely thanks to hype surrounding artificial intelligence.
That peaked in October 2025, when the forward P/E ratio for the S&P 500 Information Technology sector reached over 30x, according to FactSet. But a succession of strong earnings seasons since then has allowed tech stocks to "grow into" their stock prices, by increasing the "E" denominator in the price-earnings equation, and thereby lowering the valuation multiple.
Morningstar research suggests the AI theme is now trading at its largest discount since 2019.
Using the researchers' own price-to-fair-value metric, it marks a "fantastic entry point" in the sector, according to chief equity strategist Michael Field.
"AI isn't a bubble that's going to burst anytime soon – the underlying fundamentals are robust," said Field.
"Demand for semiconductors is beating expectations and key drivers like data centers and infrastructure remain intact. The AI story has further to go, and investors should make the most of it while these opportunities still exist."