As Microsoft $MSFT ( ▲ 1.42% ) and Meta $META ( ▲ 1.46% ) kick off megacap tech earnings, Goldman Sachs is pointing out something unusual: the group is not as expensive as many investors assume. According to Goldman, megacap tech now trades at about 27 times forward earnings, placing it in just the 59th percentile of valuations over the past decade.
Even more surprising, the sector’s price-to-earnings premium versus the rest of the S&P 500 sits at 31%, which ranks in only the 24th percentile over the last 10 years.
AI Hype, But Not Peak Valuations
While free cash flow multiples remain elevated and leave room for further pullbacks, Goldman notes that the group’s PEG ratio stands around 1.4 times, nearly matching the valuation trough seen in late 2022. In other words, growth expectations are not being priced at extreme bubble-like levels, at least not yet.
This gap between earnings-based and cash-flow-based valuations suggests investors are still cautious about how much long-term profit AI investments will actually generate.
Short-Term Winners, Long-Term Questions
So far in 2026, markets have focused more on companies benefiting from immediate AI-related shortages and near-term profit opportunities rather than betting aggressively on decades of AI-driven dominance. That explains why valuations are elevated but not stretched to historic extremes.
The big test comes now. As megacap leaders report earnings, investors will be watching closely to see whether confidence in long-term AI payoffs rises, which could push valuations higher, or whether skepticism keeps a lid on multiples.