Tech ETFs like QQQ and VGT have posted annual returns of 16% to 26% in recent years. But high prices and market uncertainty are making some investors question their tech exposure.
Tech stocks have led the U.S. market for years. Now, their high prices are making investors think twice about holding on or cashing out. The Nasdaq-100 is up 20% so far this year. If that holds, it will be the fourth year in a row with gains above 20%. But the Shiller P/E ratio for the S&P 500 is close to 40, a level last seen during the dot-com bubble. Worries about an overheated market are growing.
Still, the picture is more complicated than just comparing to past bubbles. The Nasdaq-100 trades at about 28 times earnings. That is high, but much lower than the early 2000s, when the ratio shot above 70 and even hit 79 in 2002. Unlike the dot-com era, today's biggest tech and AI companies are making real profits. That gives some backing to their current prices.
On September 23, 2026, the Nasdaq Composite reached a new all-time high, with a year-to-date gain exceeding 17%.
Why ETF diversification matters
For investors who do not want to pick single stocks in a jumpy sector, broad tech ETFs like Invesco QQQ and Vanguard Information Technology ETF (VGT) offer a way to stay in the game while spreading out risk. QQQ tracks the Nasdaq-100, which covers tech giants and some companies from other sectors. VGT sticks closer to pure tech. This mix can soften the blow if one stock drops hard. That point was made clear in recent analysis on portfolio risk.
Buying ETFs also means investors are less likely to get caught up in the kind of wild bets that marked the dot-com years, when many firms had little or no profit. Today, most big tech names have real earnings and strong growth forecasts. But that does not mean sharp drops are off the table if those forecasts fall short.
According to a September 2026 market review by Lake Ridge Bank, the Shiller P/E for the U.S. market stood at 41.9x as of August 31, 2026, leading analysts to classify the market as 'strongly overvalued.' This is significantly higher than the long-term average of about 17.4, highlighting the current valuation premium.
Long-term performance versus short-term risk
Over the last 20 years, both VGT and QQQ have averaged about 16% a year. The S&P 500 has returned about 13%. In the past decade, VGT's annual return jumped to 23%, while the S&P 500 stayed at 13%. These numbers show why many investors keep some tech in their portfolios, even as prices swing.
But high prices can make swings bigger. If earnings growth slows or investors get nervous, tech-heavy portfolios could fall harder than more balanced ones. The Shiller P/E, which smooths out earnings over a decade and adjusts for inflation, shows that markets can stay expensive for a long time before dropping back to normal. Investors should be ready for lower returns or more ups and downs, especially if today's profit forecasts turn out to be too high.
Comparing today's market to past bubbles
There are some surface similarities to the late 1990s, but the differences matter. During the dot-com boom, prices were driven by hype, not profits. The crash that followed left many investors with big losses. Today's tech leaders are making money and hold strong positions in their fields. But that does not mean they are safe from market drops.
For reference, the Nasdaq-100's P/E ratio hit 79 in 2002 and stayed above 30 until 2004. Now, the ratio is 28. That is still high, but it is backed by stronger profits. Even so, investors should not count on high returns lasting forever or think that diversification alone will erase risk. Whether to keep, cut, or add to tech holdings depends on each person's goals, risk comfort, and time frame-not just recent gains.
Knowing how ETFs work is key for anyone looking at sector investing. ETFs like QQQ and VGT pool money to buy a group of stocks, giving instant diversification and easy trading. They usually cost less than active funds, but their results will closely match the index they track, for better or worse. Investors should check what the fund owns, its fees, and how much it leans on tech before deciding. Past returns have been strong, but future results will depend on how the companies inside these funds perform and on the wider market.
Reuters reported that on September 21, 2026, the Nasdaq closed at 27,122.09 after a 2.26% daily jump. This shows how strong big tech stocks have been compared to the rest of the market. The rally has been helped by new excitement around artificial intelligence. AMD, for example, rose nearly 10% in one day and hit a market value of about $1 trillion. This shows the sector's momentum, even with high price tags. For more, see the Reuters financial review.
