Hua Er Jie Jian Wen·2025-09-19 12:50Core Viewpoint - The valuation bubble in large U.S. tech stocks has not yet peaked, and there is still room for further gains, according to Bank of America analysts [1][3]. Group 1: Valuation and Historical Comparison - The average price increase from the bottom to the peak in past major market bubbles has been 244%, while the "Magnificent Seven" (Tesla, Google, Apple, Meta, Amazon, Microsoft, and Nvidia) has seen a cumulative increase of 223% since March 2023 [3]. - Current trailing P/E ratio for the "Magnificent Seven" is 39 times, compared to historical bubbles where it typically reached 58 times [3]. - The stock prices of the "Magnificent Seven" are only 20% above their 200-day moving average, while historical bubbles have seen prices exceed this average by 29% [3]. Group 2: Market Sentiment and Drivers - Strong market sentiment, a favorable macroeconomic environment, ongoing enthusiasm for artificial intelligence, and expectations of further interest rate cuts by the Federal Reserve are key factors supporting the rise of tech stocks [4]. - The S&P 500 Information Technology Index has surged 56% since its low in April, with investors consistently buying during pullbacks [4]. Group 3: Investment Strategies - A recent fund manager survey indicated that "going long on the Magnificent Seven" is viewed as the most crowded trade, with 42% of respondents agreeing [5]. - The concentration of this trade aligns with historical bubble characteristics, as seen during the 2000 internet bubble [5]. - While optimistic about the continuation of the tech stock bubble, Bank of America analysts recommend a balanced strategy, suggesting a "barbell strategy" that includes both large tech stocks and some "bad value stocks" to manage risk [5].