"The S&P 500 has risen 14.7% this year, repeatedly breaking new record highs. But 40% of the index's value comes from the 10 biggest stocks within it, all but one of which are tech companies. Most of those companies, in turn, are pouring vast sums into AI for the development of new data centers, large language models, and the massive amounts of electricity they guzzle."
"The recipients of the lion's share of that money are 10 AI companies that are interlocked with one another as customers and investors in an "increasingly circular" way, as a recent research note from Morgan Stanleydescribed it. That note referenced relationships between OpenAI, Nvidia, Oracle, Microsoft, CoreWeave, and AMD, involving billions in equity stakes, revenue sharing, vendor financing, and "repurchase agreement[s]" being passed back and forth among them."
Since the October 2022 bull market began, roughly 75% of S&P 500 gains have come from seven mega-cap tech stocks with a combined market cap near $21.5 trillion. The S&P 500 is up 14.7% year-to-date while the 10 largest stocks account for roughly 40% of the index's value. Most leading tech companies are investing heavily in AI infrastructure, large language models, and energy-intensive data centers. Goldman Sachs projects about $390 billion in AI capex this year, with Bank of America forecasting $1.2 trillion by 2030. Major AI vendors and platforms are financially and commercially interlocked, concentrating risk if AI underperforms.
Read at Fortune
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