The forward P/E ratio of the S&P 500 Information Technology sector has dropped from a peak of 40 during the AI boom to approximately 20, according to Apollo Global Management's Chief Economist Torsten Slok. This decline marks a return to pre-AI surge levels, driven by sector rotation due to Middle East conflicts, uncertain AI capital expenditure returns, and slowing profit growth. Major tech stocks like NVIDIA and Microsoft have experienced significant valuation adjustments, with NVIDIA's forward P/E falling to 21.4x and Microsoft's market cap dropping below $3 trillion. The valuation compression is attributed to multiple factors, including capital outflows from tech to energy sectors and the uncertain returns on massive AI investments. Despite projected earnings growth, AI-related revenues remain insufficient to justify the high capital expenditures. Insider selling among major tech firms has also unsettled markets. While some analysts argue that current valuations reflect genuine revenues and business models, others warn of potential risks, drawing parallels to historical valuation bubbles.