The big guns report this week. Israel will be firing lots of large weapons.

See what I did there? Now laugh. Because if gallows humor isn’t your thing, I’ll be a rough read.

No, but seriously, America’s biggest tech companies report earnings this week. Investors will hear from five of the Magnificent 7. Tesla did its part last week, soaring more than 20% on decent numbers and a lot of promises.

As a collective, the vaunted septet trades just off its July record. Valuations for the group are obviously quite rich. “The rise of a select group of ‘superstar’ firms explains why the cap-weighted S&P 500 index is both highly concentrated and trades at a high P/E multiple,” Goldman’s David Kostin remarked late last week, noting that the valuation premium for the top 10 stocks is now the most extreme since the dot-com days (figure on the left, below).

The figure on the right shows you how optimistic analysts are about the long-term outlook for the “superstars.” As Kostin pointed out, “consensus long-term growth expectations for the 10 largest stocks in the S&P 500 are currently in the 99th percentile relative to the past two decades.”

Remember: Overly-optimistic long-term growth expectations were part and parcel of the dot-com bust. It wasn’t just a grand unwind of generalized insanity, although it was partly that.

The Magnificent 7 comes into earnings over-owned according to professionals, who again identified the group as the “most crowded trade” on the planet in this month’s installment of BofA’s Global Fund Manager survey. “Long Magnificent 7” has now spent 19 months atop the crowded trade list.

As the color on the right (penned by BofA’s Michael Hartnett) notes, consensus around the Magnificent 7 as the most crowded trade reached 71% in July. So, when asked to identify the most crowded trade, nearly three-quarters of panelists said “Long Mag7.” That share dwindled to 43% as of this month, with “Long China” grabbing some votes amid stimulus bets.

Over the next several quarters, analysts generally expect big-tech earnings growth to level off at between 15% and 20%. By the end of next year, aggregate index EPS growth could be running very close to profit growth for the mega-caps.

The figure below shows how consensus expects the EPS growth gap to narrow.

Those expectations — for EPS growth to broaden out — are part and parcel of various “catch up trade” calls.

Of course, America’s mighty, monopolistic mega-caps are the corporate personification of “American exceptionalism,” and although nobody likes a monopoly in theory, people sure do like to invest in them. The monopoly business is a good business to be in if you can get away with it. If he were still alive, Frank Lucas would attest to that.

Anyway, the big guns, inclusive of Nvidia which won’t report until next month, probably grew earnings by nearly 20% in Q3 as a group. Whether or not that kind of growth — and, perhaps more to the point, the long-term potential for new, AI-related revenue streams to ensure the so-called “hyperscalers” retain their pole positions — is enough to justify current valuations is a matter for debate. But some worry the mechanical effect on index-level valuations in extremely concentrated benchmarks (i.e., benchmarks like the S&P and Nasdaq 100, where the heavyweights sport rich multiples) is perilous, particularly in the event one or more of those heavyweights fail to live up to lofty expectations.

“Despite the historical precedent that dominant firms in the index eventually exhibit decelerating growth, index-level valuation does not always price this risk,” Goldman’s Kostin went on, in the same note mentioned above. “While ‘one decision stocks’ may individually trade at high valuations on account of their greater potential return, at the aggregate index level the lack of valuation discount means investors are not always compensated for the lack of diversification and higher volatility embedded in a high concentration market.”