(Bloomberg) — Worries have been mounting for weeks that the S&P 500’s (^GSPC) push to record after record risks becoming a bubble, with the index’s swollen valuation cited most often as cause for concern.

Critics point to the tech sector’s outsize influence on this year’s gain, with just five stocks, all megacap tech firms, driving half of the 12% advance. But a closer look shows tech giants have largely justified their elevated valuations with profit growth that outstrips share-price appreciation.

Most Read from Bloomberg

Homeless Advocates Sue HUD Over Ideology Tests for Grants

Yesterday’s Schools of Tomorrow Face the Future

NY’s LIRR Plans to Run Free Bus Service If Workers Strike

Chicago Schools Come Back to Muni Market in High Yield Rally

It’s the rest of the market that is starting to look a bit overpriced, according to Seaport Research Partners.

An index of S&P 500 companies that excludes the technology sector has risen a solid 13% over the last year, but has seen profits grow by just 6.4%, according to data compiled by Bloomberg Intelligence. The S&P 500 Information Technology index has surged 27%, a rate that looks more restrained when put up against the sector’s earnings growth of 26.9%.

The worries are shifting after a stellar earnings season for Big Tech masked worrying trends in other areas of the market. The materials sector, largely comprised of chemicals manufacturers and miners, has climbed 9% this year while earnings have dropped 13%. One of the clearest examples in the sector is Dow Inc., now the most expensive stock in the entire S&P 500, trading at an astounding 914-times earnings.

“Where is the speculation? The speculation is not in the tech stuff, it’s in the non-tech stuff,” Jonathan Golub, managing director and chief equity strategist at Seaport Research Partners, said by phone.

The S&P 500 trades at more than 27 times forward earnings, a level reached only in other times of extreme bullishness. Tech shares also sport heady valuations, with some such as Oracle Corp. and Broadcom Corp. trading at 67 times profits and 86 times profits — worrisome, to be sure.

But the Magnificent 7 tech giants that includes the likes of Nvidia Corp. (NVDA), Microsoft Corp. (MSFT), Meta Platforms Inc. (META) and Alphabet Inc. (GOOG, GOOGL) has seen its P/E ratio fall by 7.9% in 2025 even as its shares have surged by 18%. And while the group’s P/E, at 43, is elevated relative to the market, its profit forecasts for growth of 20% in the coming 12 months may partly justify the price.

Seaport data show that a broader look at tech and tech-heavy stocks shows a similar picture. It groups all the tech companies in the S&P 500 plus Alphabet, Meta and Amazon.com Inc. (AMZN), which are in the communications services sector. Their shares have climbed roughly 15% this year, essentially matching the 15% growth in earnings per share.

The rest of the S&P 500, according to Jim Paulsen, a well-followed investment strategist, looks a bit more frothy, based on the performance of profits relative to shares.

“Profit success during this bull market has essentially been limited to those companies in the information industry,” he said. “It’s tempting to say new-era companies have not earned the lofty valuations they currently have,” he said, but they have “grown so large during this bull run” in part due to “colossal fundamental performance.”

Some other segments of the market are trading well above their historical levels without the blockbuster earnings growth. The industrials and consumer discretionary sectors, for instance, have seen their P/E ratios rise by 17% and 15% this year, significantly outpacing earnings growth for both sectors.

Still, longer-term concerns about valuations in general and tech-valuation in particular have crept up. Ed Clissold, chief US strategist at Ned Davis Research, points out that since the low of the 2022 bear market, the S&P 500 has climbed 83% while earnings are only up 16%.

“It’s no wonder, then, that valuations have risen,” Clissold wrote in a Sept. 11 research note.

But Clissold also points out that stretched valuations are not limited to the tech sector. Even when you remove the outliers — which are the mega-cap stocks — Clissold said in a note that both “the average stock is expensive” and “the cheapest stocks are expensive.”

Most Read from Bloomberg Businessweek

The Corporate Saga Behind Jeep’s Downfall

Filipinos Are Addicted to Online Gambling. So Is Their Government

The Boom in ‘Better for You’ Kid Snacks Is Worse for Parents

Are Trampoline Bunnies and Dog Podcasters the Future of Entertainment?

How South Korean Salmon Sperm Facials Became America’s Latest Beauty Obsession

©2025 Bloomberg L.P.