Nvidia and AMD just hit record highs, but tech stocks still look cheap

Don't let two high-profile tech stocks hitting record highs lead you to believe that we are set up for a dot-com-style bubble burst.

Tech's valuation expansion is far more restrained than during the late-90s internet bubble, Truist chief strategist Keith Lerner pointed out (see the chart below).

Lerner's work shows tech's forward price-to-earnings ratio surged nearly 250% before the March 2000 tech bubble peak. That compares with an expansion of just 14% since the current bull market began in October 2022.

"Tech earnings remain strong, while valuations have reset to near levels seen around ChatGPT's launch," Lerner explained about why he is staying bullish on tech stocks.

The appetite to own tech leaders remains strong, in large part because their future growth prospects look strong and current valuations aren't demanding.

Leading the way right now are semiconductor powerhouses AMD ( AMD ) and Nvidia ( NVDA ), both of which shattered their record highs late last week.

AMD surged to an all-time closing peak of $633.91, putting the chipmaker within striking distance of a historic $1.1 trillion market valuation.

Simultaneously, AI chip leader Nvidia broke out to a fresh record high of $237.87, pushing its total market cap to an extraordinary $5.7 trillion as excitement builds around its upcoming DGX SPARK hardware releases.

These record valuations of two market darlings prove that, despite broad market yield volatility, Wall Street remains fiercely committed to paying a premium for pure-play AI hardware leaders.

"We find positioning in the space is cleaner, de-rating in a majority of areas has been very significant, capex upswing will likely stay intact, despite some recent slowdown headlines, earnings strength is continuing, and monetisation cases are building, all of which should support re-engagement with the group, in our view," JPMorgan strategist Mislav Matejka wrote.

Brian Sozzi is Yahoo Finance's Executive Editor, host of the Sozzi Unleashed morning show and the Power Players with Brian Sozzi podcast, and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi , Instagram , and LinkedIn . Tips on stories? Email brian.sozzi@yahoofinance.com.