A small group of mega-cap technology companies now accounts for more than 30% of the S&P 500, over three times their weighting from a decade ago. Nvidia, Microsoft and Meta contributed about 270 points of the S&P 500's 579-point advance in 2025, nearly half of the index's 9.8% rally. Market responses split between concern that the top-heaviness creates systemic and diversification risks and confidence that outsized gains reflect sustained revenue and profit growth. The largest tech firms reported profit growth well above broader estimates while overall S&P 500 earnings rose 11%, and valuation measures such as PEG ratios do not show clear overvaluation.
The unprecedented level of concentration in a handful of tech stocks provokes strong feelings on Wall Street. Some investors fear the top-heaviness means the bull run is on quicksand and will sink the minute an AI-frenzy-fueled Nvidia Corp. or Microsoft Corp. stumbles. The dominance also leads to portfolio risks, with diversification suffering. For others, the worries are overblown, gains have historically been powered by a small group of megacaps, and this is simply tech's latest time to shine.
The debate is becoming more urgent as Nividia, Microsoft, Apple Inc., Alphabet Inc., Amazon.com Inc. and Meta Platforms Inc. account for more than 30% of the benchmark index, more than three times their weighting from a decade ago. Through Friday's close, gains for Nividia, Microsoft and Meta alone account for about 270 points of the S&P 500's 579-point advance in 2025, or nearly half of this year's 9.8% rally.
For Scott Chronert, Citi Research's managing director, the concentration is a badge of honor, well-deserved for a group that continues to deliver unparalleled growth in sales and earnings. The five biggest Nvidia, Microsoft, Apple, Alphabet and Amazon increased profits by 26% in the second quarter, compared with estimates for 15%, according to data compiled by Bloomberg Intelligence. The S&P 500 as a whole saw earnings rise by 11% from a year ago.
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