Is the Vanguard S&P 500 ETF Still Worth Buying Right Now?

The S&P 500 ETF (VOO) still screens as a short-term buy, but valuation risk is rising: its forward P/E is around 21 while the Shiller CAPE ratio has climbed to 42.84, near the tech-bubble peak of 44.19 in November 1999. The article argues AI-driven earnings growth supports near-term fundamentals, yet stock prices may be getting stretched on a long-term basis. Overall, this is a valuation-focused commentary rather than a catalyst-driven market event.

Analysis

The key signal here is not that the market is expensive, but that the market is becoming more dependent on a narrow set of AI-linked cash generators to justify the index level. That creates a fragile setup: if capex intensity stays high but incremental revenue conversion slows, the multiple compression will hit the same beneficiaries that have been propping up earnings growth. In other words, the market can look “fundamentally fine” right up until the marginal buyer realizes the earnings denominator is getting artificially boosted by one capital cycle.

The second-order effect is that passive exposure to VOO increasingly behaves like an embedded barbell: long mega-cap AI winners, short everything else through valuation dispersion. That can persist for months, but it makes index ownership less attractive on a risk-adjusted basis than selective exposure to beneficiaries with better cash-return visibility. The more the AI trade broadens into adjacent suppliers and cyclical capex names, the more the index relies on future growth to defend today’s valuation — a much weaker proposition than current P/E alone suggests.

The contrarian miss is that a high CAPE does not require an immediate drawdown; it mainly lowers forward returns and increases sensitivity to any earnings disappointment. If 2026/2027 growth estimates stop rising, the compression can be swift even without a macro recession, because investors are currently paying up for a multi-year continuation of AI momentum. That means the setup is less about calling a top and more about owning convexity against a regime shift in earnings breadth and capex ROI.

NVDA remains the cleanest expression of the theme, but the asymmetry is moving from outright longs into relative-value structures. INTC benefits only if AI demand broadens beyond the current concentrated winners, while NFLX is largely irrelevant here except as a reminder that high-quality compounders can be expensive without being bubble-like. The real opportunity is to separate structural winners from index beta before valuation dispersion narrows in a risk-off tape.

Key Decisions for Investors

• Reduce passive S&P 500 exposure via VOO into strength over the next 1-3 weeks; keep only core strategic allocation, as expected 12-month returns are now more vulnerable to multiple compression than earnings upside.
• Maintain a tactical long NVDA / short VOO pair for 1-3 months: if AI capex continues to dominate earnings revisions, NVDA should retain relative strength even if the index derates; stop if NVDA underperforms the index by ~8-10%.
• Buy 6-9 month puts on VOO or SPY as a low-cost hedge against a sharp de-rating event; the payoff improves if 2026 EPS estimates flatten while the CAPE remains near current levels.
• Prefer selective single-name exposure over index beta: allocate new risk to names with direct AI monetization and visible free-cash-flow inflection rather than broad market exposure, where valuation support is weakest.
• Use INTC only as a speculative relative-value beneficiary, not a core long; it offers upside if AI supply-chain demand broadens, but the thesis is contingent and lower quality than NVDA.