Apollo Economist Warns of AI Valuation Reset as Tech Multiples Halve

The rapid expansion of valuations driven by artificial intelligence enthusiasm is showing signs of a significant reversal. Torsten Slok, the chief economist at Apollo, indicates that the technology sector is undergoing a valuation reset, moving away from the peak optimism that characterized the initial AI surge. This correction is primarily evidenced by a sharp compression in forward price-to-earnings (P/E) ratios. According to Slok, multiples that had climbed as high as 40x are now retreating toward 20x, effectively returning valuations to levels seen before the AI-driven rally began. The reset is not limited to a few outliers but reflects a broader trend across the technology components of the S&P 500. This shift suggests that investors are becoming more discerning about the actual earnings delivery of AI promises versus the speculative premiums previously paid. Such a drastic reduction in multiples typically signals a transition from a growth-at-any-price phase to a value-driven phase. If this trend persists, it could lead to increased volatility in mega-cap tech stocks and a broader rebalancing of equity portfolios as the 'AI premium' evaporates.