Profit versus hype: why BlackRock does not consider US tech giants to be overvalued

The "magnificent seven" US technology companies, including Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla, became cheaper in terms of multiples at the end of 2025, wrote BlackRock's chief global investment strategist Wei Li on LinkedIn. She calls this the most misunderstood fact of the past year: while other assets around the world became less accessible to investors, the multiples of US tech giants declined.

According to Wei Li, this happened because the growth in Mag 7 companies' share prices was entirely driven by earnings momentum. Bloomberg data confirms the compression of multiples: the normalized P/E ratio for the Magnificent Seven fell to 95.6 points by the end of the year, compared to a base of 100 in January. Company earnings grew faster than their market value, so investors began to pay less for each dollar of profit than at the beginning of the year.

"Long-term valuation metrics, such as the Shiller ratio, on the other hand, appear shockingly high only because the 10-year average earnings do not yet take into account the AI boom and the market paradigm shift of recent years," Lee writes.

She notes that other markets—in Europe, Japan, and emerging countries—have seen upward revaluations. There, multiples have risen to 112.6–117 points, as stock price growth has outpaced earnings growth. And while the rise in prices in the US is supported by earnings, in the markets of Europe, Japan, and emerging countries, "the rise in multiples reflects, perhaps, the optimism of 'catching up' rather than a confirmed acceleration in productivity growth," the strategist concluded.

This article was AI-translated and verified by a human editor