The US stock market shows a dangerous concentration of gains. Despite a series of record highs for the S&P 500, a deep decline among the majority of its component companies lies behind the veneer of prosperity. The entire rally is being driven by a narrow group of tech giants that have become the beneficiaries of the AI frenzy.
Data analysis shows that the S&P 500 would be in negative territory without the contribution of leaders such as Nvidia Corp., Microsoft Corp., and Broadcom Inc. Since late February, amid the escalation of the Middle East conflict, 118 stocks in the index have plunged more than 10%. The main victims have been agriculture and other sectors sensitive to soaring commodity costs. At the same time, only 82 companies have gained more than 10%, the vast majority of which are directly tied to AI.
Investment noise
Aggressive demand for AI assets has created excess noise in valuations. Investors are neglecting risks and clamoring for access to upcoming IPOs by startups like OpenAI and Anthropic. Bulls argue that the current cycle differs from the dot‑com bubble of 2000 because today’s leaders generate real profits and trade at more reasonable multiples.
However, skeptics point to the gap between market capitalizations and the real business use cases for the technology. The market is currently financing massive infrastructure building projects and data centers, while significant free cash flow from AI adoption is not expected until the end of the decade.
Timing risks
History shows that the main problem for market participants is not just identifying overheating but picking the right time to exit. Leaving too early from growing assets can cost investors as much as ignoring signs of speculative mania. The market continues to bet on technological transformation, overlooking the fact that the fundamentals supporting this rally are becoming more fragile.