High expectations for US tech stocks

Within the S&P 500 index, the technology sector makes up 27% of the index, reached a price/sales ratio of 7.5x and has become more expensive than it ever was during the dot-com era. Valuations are extreme but in the current momentum driven market environment IT stocks can continue to overshoot. True, headwinds are building up (fiercer competition, higher taxes, stricter regulations) but as long as companies are fulfilling rosy earnings expectations, investors are likely to turn a blind eye on valuations. As a matter of fact, the Q2 2021 earnings season has started and major IT companies will report their numbers over the next two weeks.

S&P 500 technology price/sales ratio
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