Big Tech stocks are getting cheaper, and that could mean gains of up to 60%

By Philip van Doorn and Christine Ji

S&P 500 stocks may be expensive relative to their historical averages, but many are cheaper than they were at the start of the quarter

Some companies have seen their stocks' forward price/earnings ratios fall significantly since September.

Whether stocks are expensive depends on how you look at things.

With a weighted forward price-to-earnings multiple of 22.4, the S&P 500 SPX is trading at an 11% premium to its five-year average of 20.1 and a 19% premium to its 10-year average of 18.8.

But, since the end of September, the index's forward P/E ratio has actually decreased from 22.9. And more than half of stocks in the S&P 500 now have lower P/E ratios than they did as of Sept. 30.

For the index, the forward P/E is based on current stock prices and rolling 12-month earnings-per-share estimates for its constituent stocks among analysts polled by LSEG, weighted by market capitalization.

Some analysts and money managers believe the recent declines in P/E valuations are highlighting opportunities to buy into quality businesses at more attractive prices, and LSEG's data shows that some of the stocks with particularly robust projected upside lie within the Big Tech universe.

Oracle Corp. (ORCL) has become the poster child for AI-debt fears, and its P/E has fallen to 23.9 from 39.2 at the end of September. That contraction has been driven mainly by the "price" part of the P/E equation: Oracle shares are down 34% since Sept. 30, while its rolling 12-month earnings-per-share figure has increased by 55 cents.

Microsoft Corp. (MSFT) has seen a less-dramatic contraction, with its forward P/E declining to 27 from 31.9 as of the end of September. That has resulted from an 8.3% decline in its share prices as its rolling forward EPS estimate has increased by 9%.

The consensus price target for Oracle shares among analysts polled by LSEG is 60% above Monday's closing price, while the consensus price target for Microsoft's stock implies 31% upside over the next 12 months.

Screening for a combination of declining P/E and increasing EPS estimates

The trend isn't limited to AI-focused stocks. We screened the entire S&P 500 and found that 290 of the stocks were showing lower forward P/E valuations at Monday's close than they did as of Sept. 30. And 249 of those companies had seen their rolling 12-month EPS estimates increase over the same period.

Here are the 20 largest companies by market capitalization that passed the screen, with forward P/E valuations declining and rolling 12-month EPS estimates increasing since Sept. 30. This first table shows the changes in forward P/E ratios and consensus 12-month EPS estimates. You might need to scroll the table or flip your device to landscape to see all of the data.

   Company                              Forward P/E  Forward P/E as of Sept. 30  12-month EPS estimate  12-month EPS estimate as of Sept. 30  Market Cap ($billions) 
   Nvidia Corp.                                23.4                        32.0                  $7.38                                 $5.76                  $4,284 
   Microsoft Corp.                             27.0                        31.9                 $17.57                                $16.17                  $3,529 
   Amazon.com Inc.                             27.4                        29.2                  $7.98                                 $7.40                  $2,379 
   Meta Platforms Inc.                         21.5                        24.5                 $30.17                                $29.47                  $1,632 
   Broadcom Inc.                               31.4                        36.6                 $10.57                                 $9.00                  $1,605 
   Berkshire Hathaway Inc.                     19.6                        23.0                 $26.28                                $21.88                  $1,092 
   JPMorgan Chase & Co.                        15.1                        15.4                 $21.07                                $20.33                    $880 
   Visa Inc.                                   26.3                        26.6                 $13.19                                $12.85                    $663 
   Oracle Corp.                                23.9                        39.2                  $7.74                                 $7.20                    $531 
   Mastercard Inc.                             29.7                        31.0                 $19.15                                $18.34                    $511 
   Palantir Technologies Inc.                 178.3                       227.5                  $1.01                                 $0.80                    $437 
   Netflix Inc.                                28.9                        38.8                  $3.24                                 $3.08                    $428 
   AbbVie Inc.                                 15.9                        16.9                 $14.25                                $13.70                    $402 
   Costco Wholesale Corp.                      41.0                        45.7                 $20.91                                $20.26                    $382 
   Procter & Gamble Co.                        20.2                        21.7                  $7.19                                 $7.10                    $339 
   GE Aerospace                                41.8                        45.2                  $7.21                                 $6.65                    $317 
   UnitedHealth Group Inc.                     19.3                        20.0                 $17.75                                $17.31                    $309 
   Micron Technology Inc.                       9.5                        10.1                 $20.89                                $16.46                    $267 
   Philip Morris International Inc.            19.0                        19.9                  $8.35                                 $8.16                    $247 
   AppLovin Corp.                              45.4                        55.3                 $14.61                                $12.74                    $228 
                                                                                                                                                        Source: LSEG 

Nvidia (NVDA) tops the list with the largest market capitalization and a remarkable decline in its forward P/E ratio. In fact, one can call Nvidia a cheap stock, based on its forward P/E valuation relative to the S&P 500 and its projected growth rates for revenue and earnings over the next two years.

Here's the list with projected compound annual growth rates (CAGR) for revenue and earnings from calendar 2025 through calendar 2027, with those for the S&P 500 at the bottom. This table also includes price changes (excluding dividends) from Sept. 30 through Monday.

   Company                              Two-year estimated sales revenue through calendar 2027  Two-year estimated EPS CAGR through calendar 2027  Forward P/E  Price change from Sept. 30 through Dec. 15 
   Nvidia Corp.                                                                          40.4%                                              44.8%         23.4                                       -5.5% 
   Microsoft Corp.                                                                       15.6%                                              17.1%         27.0                                       -8.3% 
   Amazon.com Inc.                                                                       11.2%                                              16.8%         27.4                                        1.4% 
   Meta Platforms Inc.                                                                   16.9%                                              17.6%         21.5                                      -11.8% 
   Broadcom Inc.                                                                         40.3%                                              41.0%         31.4                                        3.0% 
   Berkshire Hathaway Inc.                                                                4.7%                                               6.4%         19.6                                        0.7% 
   JPMorgan Chase & Co.                                                                   3.7%                                               6.1%         15.1                                        1.5% 
   Visa Inc.                                                                             10.5%                                              12.4%         26.3                                        1.6% 
   Oracle Corp.                                                                          33.5%                                              19.2%         23.9                                      -34.2% 
   Mastercard Inc.                                                                       12.3%                                              16.2%         29.7                                        0.1% 
   Palantir Technologies Inc.                                                            40.4%                                              39.0%        178.3                                        0.5% 
   Netflix Inc.                                                                          12.2%                                              24.0%         28.9                                      -21.8% 
   AbbVie Inc.                                                                            8.7%                                              22.0%         15.9                                       -1.8% 
   Costco Wholesale Corp.                                                                 7.7%                                              10.5%         41.0                                       -7.0% 

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12-16-25 0800ET