AI Wealth Concentration: 40% of S&P 500 Companies Concentrate: Warning Signs of a Tech Bubble

 

AI Wealth Concentration: 40% of S&P 500 Companies Concentrate: Warning Signs of a Tech Bubble

 

 

The New York Times analyzed warning signs of a tech bubble in the US, with the top 10 companies in the S&P 500 controlling 40% of the market.

Nvidia, the chipmaker that became the world's most valuable publicly traded company two years ago, held assets of over $4.75 trillion as of Monday morning. Despite reporting strong earnings, its stock price fell 5.5% the previous day.

The two conglomerates, Samsung and SK, accounted for 61.29% of the Korean stock market, reaching a combined market capitalization of 2,628 trillion won, more than doubling from 30.56% a year ago.
The weighting of Samsung Electronics and SK Hynix, which surged under the Lee Jae-myung administration's KOSPI 5000 strategy, soared to 40% as of the 27th, surpassing the 33.41% weighting of M7 in the S&P 500.

Nvidia's market capitalization is more than double the combined value of all companies in the energy sector, including oil giants like ExxonMobil and Chevron.

Semiconductor maker Nvidia's market capitalization has recently ballooned so dramatically that it is now 20% larger than the combined value of all companies in the materials, utilities, and real estate sectors.

Ironically, the day after Nvidia reported massive profits in its most recent quarter, its stock price fell 5.5%. The New York Times stated, "As wealth becomes more concentrated, so does the risk. With so much money concentrated in a small number of companies, stock trading can become more volatile and vulnerable to large swings."

 

From early 2026 to the present, more than a fifth of S&P 500 stocks have fluctuated by more than 20%, with companies and industries particularly vulnerable to disruption by AI taking the biggest hit.

 

Volatility could worsen further as everyone restructures or responds to AI.

 

To understand how unusual and concerning this moment is, the New York Times analyzed data from the S&P Dow Jones Indices, which compiles the market value of S&P 500 companies from December 1999 and August 2007. The New York Times stated in its analysis, "Each date was chosen approximately three months before the recession, allowing us to determine the weighting of the index before the full onset of the crisis and the subsequent decline in value." 

The analysis concluded, "The companies comprising the index have experienced periodic fluctuations, and sectors have been reclassified over the past two decades. However, even accounting for these changes, the market has become increasingly lopsided."

 

As of December 1999, during the dot-com bubble, the technology sector accounted for 26% of the total market. By August 2007, during the financial crisis and just before the Great Recession, it had reached just 14%.

 

Today, the concentration of technology companies has monopolized a third of the market's value, while other key sectors, such as energy and manufacturing, have shrunk.

 

The analysis, which tracks all companies in the S&P 500 by market value, found that while the stock index is comprised of 11 distinct sectors, only a few dominate. The New York Times reported, "Today, the technology industry accounts for 32% of the S&P 500's total value, or $20.1 trillion of its $63 trillion total." 

The five largest publicly traded companies in the U.S. account for nearly a third of the index's value, and while they are all tech companies generating significant profits in one way or another, companies like Amazon and Alphabet are classified in a separate sector."

What unites these tech giants is artificial intelligence, and Nvidia makes the hardware that powers it.

Microsoft, Apple, and others have made big bets on products people can use in their daily lives.

Growing concerns about excessive spending on AI and its potential to disrupt broad sectors of the economy have led to warnings about the undue influence these companies have on the market, and that their index dominance could obscure fundamental risks elsewhere. 

The New York Times noted, "If some of these giants falter, it could cause widespread damage to investors' portfolios and retirement funds, sending ripples throughout the economy." They added, "This dynamic draws comparisons to past crises, particularly the dot-com bubble. While technology companies dominated stock indexes back then, they weren't as heavily weighted, and many were unprofitable, or even unprofitable at all."

 

How does the current situation compare to those pre-crisis moments?

In 1999, the technology-energy market capitalization was $22.9 trillion. In 2007, the technology-finance industry was $20.4 trillion. Today, the technology-finance, telecommunications, energy, utilities, and materials sectors are worth $63 trillion.

In December 1999, Microsoft was the most valuable technology company in the months leading up to the dot-com bubble burst.

At the time, Cisco was second, and it currently ranks 32nd in the S&P 500. While the dot-com bubble was considered a bubble at the time, technology didn't dominate the market as it does today.

Only two of the top five companies were in the technology sector.

The second-largest company at the time was the industrial giant General Electric.

Just before the 2007 financial crisis, the 11 industries that define the S&P 500 held relatively even weights in the index's overall value.

The financial sector was the largest, accounting for 19%.

Since then, the enormous growth of the internet, social media, and other technologies has driven the economy.

The market's concentration in a small number of companies has only worsened, with the top 10 companies now accounting for nearly 40% of the S&P 500.

Although Amazon and Tesla are considered technology companies, they account for 60% of the consumer goods sector.

Over the past year, spending by both companies has been driven primarily by artificial intelligence. Amazon announced plans to invest $200 billion in data centers, and Tesla is investing heavily in self-driving cars and humanoid robots.

While this sector has seen overall growth, the companies that have seen the largest market value are not.

Home Depot was the leader in 1999 and 2007.

The AI boom has impacted every corner of the economy, and as data centers proliferate to support large-scale computing, the utility sector is experiencing significant growth, driven by the increased demand for energy on the power grid.

The New York Times analyzed the situation and found that "by 2025, companies like NextEra and Exelon have seen their valuations soar," adding, "The industrial sector has also undergone significant changes. General Electric was the dominant force in 1999 and 2007, but the recent explosion in data center construction has leveled out this sector's growth."

Industrial stock GE remains the leader in the AI boom, but Caterpillar follows closely behind. Caterpillar, often associated with construction, has seen a surge in sales of turbines and power generation equipment used in data centers.

The New York Times reported, “One big difference between today’s big tech companies and their dot-com-era peers is that many are now making money. Many famous companies, including Pets.com in the late 1990s, had skyrocketing valuations but meager revenues, and many quickly collapsed when the bubble burst.”

The New York Times continued, “Companies like Nvidia, Apple, and Alphabet generate hundreds of billions of dollars in revenue each year, and many of the leading companies in artificial intelligence today are privately held.” “OpenAI, Anthropic, and SpaceX are expected to go public later this year, which could further tilt market dynamics toward technology and artificial intelligence.” Reuters reported on the 27th that, “NVIDIA reported better-than-expected January quarter earnings on the 26th and forecast that current quarter revenue would beat market estimates, but U.S. stocks closed lower and the company’s shares fluctuated in after-hours trading.” “U.S. stock futures fell in Asian trading, with the S&P 500 E-mini down 0.41% and the tech-heavy Nasdaq 100 E-mini down 0.36%,” the report said. 

Westpac Group Chief Economist Mantas Banagas wrote in a note, “AI and geopolitics remained at the forefront of financial markets, prompting a retreat from risk assets and a shift toward safe-haven assets.” “The lack of a major breakthrough in U.S.-Iran talks has kept the oil market in a wait-and-see mode, continuing to present a significant risk of escalating military tensions between the two countries.”