S&P 500's Shiller P/E Climbs to 41.37 on the Back of the AI Boom

The S&P 500's cyclically adjusted price-to-earnings ratio (Shiller P/E, or CAPE) has climbed to 41.37 — up 10.4% from a year ago (37.47) and well above the 27.94 level seen in March 2023, Gate.com reports. Worth correcting a common comparison up front: contrary to the popular framing that pairs this with 1929, a CAPE above 40 has only happened once in market history — during the 1999-2000 dot-com peak, when it hit 41.7-42.1. The 1929 peak, often cited in the same breath, was actually much lower, around 32.6, The Motley Fool notes.

• Combined AI-infrastructure capex from Alphabet, Microsoft, Amazon, and Meta is projected at roughly $724 billion for 2026 and about $950 billion for 2027.
• Alphabet raised its 2026 capex guidance by $15 billion to $190-205 billion, and reported its first-ever negative quarterly free cash flow as a public company.
• The "Magnificent Seven" account for 32.5% of the S&P 500's market cap, with the top 10 stocks at 43% — nearly double the 1990-2015 historical average of 18-23%.
• Bearish sentiment in the American Association of Individual Investors survey jumped sharply to 42.3%.

“The market is now extraordinarily sensitive to capex—obsessively so. Previously 'more is better'; now 'less is better.'”

— an unnamed chief investment officer

Quote source: Gate.com.

The market's logic has flipped: rising capex from tech giants used to read as confidence in future demand, and now reads as a risk to margins and cash flow — something we covered separately in our piece on the AI sector's biggest test of the week. A related but mirror-image dynamic is playing out in Asian markets, where AI-infrastructure enthusiasm is showing up not as capex anxiety but as a sharp rally in component suppliers like Chinese memory chipmaker CXMT.

This article is for informational purposes only and does not constitute investment advice.