Jeremy Siegel: Big Tech Stocks Showing 'Overspeculation' Signs

“This can continue a long time until we get a big earnings miss, but we know if these trends last long enough, it does not end well,” he added.

Siegel brushed off the idea that AI stocks are in the same position now as large-cap tech equities were in March 2000, when the dot-com bubble burst and sparked a market slide. Back then, internet companies with no earnings traded at huge valuations, and many tech stocks sold at triple-digit price-to-earnings ratios, he explained, noting that he had flagged many as sucker’s bets.

“The market as a whole is much more reasonably priced now — just over 20 times forward earnings — and there are some real pockets of value closer to 12-13 times earnings in the small-cap value segment of the market. That was an opportunity in the aftermath of tech hype in 2000 and, if these trends continue, we may approach a similar opportunity in the unloved non-tech segments in the future today,” Siegel said.

Meanwhile, with the S&P 500 surpassing 5,000 last week, the stock index has reached 7.5 times the under-700 low it hit in March 2009, after the global financial crisis, the economist and finance professor emeritus noted.

That return more than doubles the long-run 6.8% a year average he calculated in his book.

“This was an absolutely remarkable 15 years and investors should not expect this to continue,” Siegel said, noting that the tech-focused Nasdaq Composite index is up over 20% a year from those lows.

“Again, while I don’t think we’re in a bubble yet, I think investors should be looking for broader participation in the markets,” Siegel said. “If the AI revolution is as real as I think it can be, it will not just benefit the mega-cap tech stocks. All firms will learn how to use and benefit from this great technology.”