Tech Tour 2026: Are big tech valuations still reasonable?
February 2026, From the Field
- Key Insights
-
- Big tech valuations look reasonable relative to their strong earnings growth, especially when compared to the broader market.
- The ability of large-cap tech companies to leverage AI is enhancing their growth potential and supporting sustained long-term returns.
- When using growth-adjusted metrics like the PEG ratio, leading tech companies appear more attractively valued than the rest of the S&P 500.
Are big tech valuations still reasonable?
Tony Wang:
Valuations do look very reasonable.
Jennifer Martin:
Big tech valuations remain reasonable on a growth-adjusted basis. How do you distinguish between companies that can still compound and those that appear too expensive to sustain future returns?
Tony Wang:
Yeah, well, so I think that, you know, valuations do look very reasonable, first of all. So I think that, you know, you look at Nvidia 25 times, Meta 14 times, Google has gone from 15 to 25, but still very reasonable. And relative to the growth, it's actually gotten cheaper over the last year. So to me, I think about it as more like the durability of the growth. And so these large cap tech companies have like tremendous scale to deploy AI. And you've also seen like AI's been augmenting their growth, which is also like, I think helps with the terminal value of these businesses. So to me, I think they look very reasonable, especially relative to the growth.
Dom Rizzo:
Look, my favorite metric to use for this is just a good old-fashioned Peter Lynch PEG ratio analysis.
Take a look at the MAG 7 PE and the MAG 7 earnings growth rate and take a look at the S&P 493, the non-MAG 7 PE and their growth rate.
And you'll find that when you adjust for the rapid earnings growth of the MAG 7, they're actually cheaper than the rest of the market.
And so as long as we're in that zone, I think that many of these stocks, particularly in big tech, particularly the large semiconductor companies as well, remain very reasonably valued.
Dominic Rizzo, CFA
Portfolio Manager
Anthony Bruce Wang
Portfolio Manager
Jennifer O'Hara Martin
Global Equity Portfolio Specialist
Tech Tour 2026: Technology Outlook
Our experts discuss expanding opportunities across the evolving technology ecosystem.
Contact us
Additional Disclosures
CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
The specific securities identified and described are for informational purposes only and do not represent recommendations.
Investment Risks
Active investing may have higher costs than passive investing and may underperform the broad market or passive peers with similar objectives. Each person's investing situation and circumstances differ. Investors should take all considerations into account before investing.
Technology companies: A fund that focuses its investments in specific industries or sectors is more susceptible to adverse developments affecting those industries and sectors than a more broadly diversified fund.
International investments can be riskier than U.S. investments due to the adverse effects of currency exchange rates, differences in market structure and liquidity, as well as specific country, regional, and economic developments. The risks of international investing are heightened for investments in emerging market and frontier market countries. Emerging and frontier market countries tend to have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed market countries.
T. Rowe Price cautions that economic estimates and forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual outcomes could differ materially from those anticipated in estimates and forward-looking statements, and future results could differ materially from any historical performance. The information presented herein is shown for illustrative, informational purposes only. Any historical data used as a basis for this analysis are based on information gathered by T. Rowe Price and from third-party sources and have not been independently verified. Forward-looking statements speak only as of the date they are made, and T. Rowe Price assumes no duty to and does not undertake to update forward-looking statements.
Important Information
This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a guarantee or a reliable indicator of future results. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.
The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.
Information presented has been obtained from sources believed to be reliable; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are those of the author(s), are of January 13, 2026 are subject to change, and may differ from the views of other T. Rowe Price Group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.
The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request. It is not intended for distribution to retail investors in any jurisdiction.
Portfolio Specialists do not assume management responsibilities.
Actual future outcomes may differ materially from any estimates or forward-looking statements provided.
T. Rowe Price Investment Services, Inc. Distributor
© 2026 T. Rowe Price. All Rights Reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, the Bighorn Sheep design and related indicators (www.troweprice.com/en/intellectual-property) are trademarks of T. Rowe Price Group, Inc. All other trademarks are the property of their respective owners.
- 202601-5140069
