The Globe and Mail reports in its Saturday edition that BofA chief U.S. quantitative strategist Savita Subramanian has identified why S&P 500 PE ratios should contract, and this is not good news for investors. The Globe's Scott Barlow writes that tech stocks are now cheaper than industrials, staples and consumer discretionary and historically, once tech stocks are cheap they have continued to underperform for a significant period. AI is already causing extreme valuation compression. The IT services sector traded at a 14-per-cent premium to the S&P 500 before ChatGPT was announced. Now its forward PE is 23 per cent below the benchmark. BofA believes new stock issuance is set to surge while buybacks become less popular. A bigger supply of stocks and less demand implies lower prices. In years when earnings growth is above average, price growth tends to be even faster. When stock prices outpace earnings, PE ratios climb automatically. Lately, the asset-light companies in technology -- index-dominating companies such as Microsoft, Meta, Alphabet and Oracle, for example -- have been shifting to owning hard assets through data-centre investment. The spending is raising debt levels, lowering balance-sheet quality.