Most readers of The Motley Fool don't have to be told twice how much technology shares have suffered this year.
They just need to look at the sea of red in their portfolios as evidence of how much these stocks have re-rated over the past 12 months.
The S&P/ASX All Technology Index (ASX: XTX) has now dropped more than 31% year to date, while the Nasdaq Composite (NASDAQ: .IXIC) has plunged 29.4%.
But as the world approaches the point at which interest rates will stop increasing, it's time to assess where the bargains can be picked up.
Cloud computing is a dominant area of tech that pretty much covers every relevant growth business in the sector. The term simply refers to tech products and services delivered over the internet.
Every quarter, New Zealand's Clare Capital examines the valuations of listed cloud companies in the US and Australia/New Zealand markets.
The latest report provides an insight as to where an investor could secure a better entry point when buying tech shares.
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US vs ANZ tech valuations
The home of public technology businesses is the United States, which has a plethora of innovative companies listed on both the NYSE and NASDAQ exchanges, all serving a massive population.
Tech is a relatively minor part of the ASX, which is dominated by mining and finance businesses.
Perhaps this explains why investors in the US seem to appreciate cloud companies more.
As of the end of September, Clare Capital's US cloud index shows a median 'enterprise value to next 12 months revenue' ratio of 5.2.
The ANZ cloud index is positively a bargain compared to that, sitting at a median multiple of 2.8.
So one could conclude that ASX tech companies are now significantly cheaper than their US counterparts.
Clare Capital's methodology involves 93 companies in the US and 50 from Australia and New Zealand.
"It is worth noting that there is a significant company size difference between the two indices, with the median EV of US companies at NZ$8.3 billion versus NZ$0.3 billion for ANZ companies," read the report.
Tech carnage could now have 'plateaued'
The brutality of 2022 is seen in how Clare Capital's US cloud index has dropped 64% over the past 12 months. The ANZ index has plummeted 48%.
However, the freefall of US cloud companies seems to have "plateaued after a rough year", with the 30 September multiple just 4% lower than the previous quarter.
Meanwhile, the Australia and New Zealand valuations actually increased 9% over the same three months.
While local tech shares are cheaper than the US equivalents, investors will need to carefully examine each company on their potential.
Historically, US tech shares have shown more upside due to a larger addressable market and an investor base more enthusiastic about the sector.
