Big Tech stocks the likes of Apple (AAPL), Amazon (AMZN), and Nvidia (NVDA) could be overdue for a correction after continuous growth in the S&P 500. Federated Hermes Chief Equity Strategist Phil Orlando joins Yahoo Finance Live to share his outlook on tech valuations obstructing growth in other sectors.

"Nvidia is sort of the poster child of this imbalance," Orlando explains, adding: "The stock has gone up by a multiple of five times [since October]. From a valuation perspective. they're trading at something like 40 times forward revenues and 130 times forward earnings. That, in our view, is excessive, and it's reminiscent of what the tech stocks did in that fourth quarter of 1999 as we were going into the Y2K calendar changeover."

Orlando notes valuation shifts could open up opportunities for value and small-cap stocks.

Video Transcript

- When it comes to tech, though, we have seen some losses. But are we headed for an even larger correction ahead?

PHIL ORLANDO: I think the answer is yes. First of all, thank you very much for having me. One of the things that we've been focused on has been the significant divergence between the performance of these big eight technology companies and the rest of the market over the balance of this year. Now, the stocks I'm talking about are Apple, Microsoft, Amazon, et cetera. These eight stocks collectively account for 28% of the weight of the S&P 500.

Now, the first half of the year has been terrific for the S&P, you're up about 20%. These eight stocks, these technology names, collectively, are up by 65% in the first seven months of the year. How are the other 492 companies doing in the S&P 500? There up about 7%.

So we think there's a significant divergence that's been created from a valuation perspective. I'll just give you one example-- Nvidia is the poster child of this imbalance. From the bottom of the market last October to where Nvidia's peaked out over the course of the last month or so, the stock has gone up by a multiple of five times. From a valuation perspective, they're trading at something like 40 times forward revenues and 130 times forward earnings. That, in our view, is excessive and it's reminiscent of what the tech stocks did in that fourth quarter of 1999 as we were going into the Y2K calendar changeover.

So we've been expecting that the technology stocks would have some profit taking in this August, September, October time frame. You've seen some sloppiness over the course of the last couple of weeks or so. We think this continues over the next few weeks and next few months. And in the meantime, we think some of the value stocks, and small cap stocks, and international stocks are probably going to feel some love.