Part 6/11:
Despite strong fundamentals, high valuations pose risks. The average price-to-earnings ratio (P/E) of the Magnificent 7 is around 44 times, a substantial premium over the S&P 500 average. Such elevated multiples raise the question: can these companies sustain their growth and justify their valuations?
It's important to note that, unlike the dot-com bubble of 1999—which saw unprofitable companies valued at hundreds of times earnings—these companies are profitable, with strong growth and competitive moats. They possess pricing power, expanding earnings momentum, and solid balance sheets, allowing them to invest aggressively in AI and new technology while maintaining their market positions.