Key Points
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Much of the market’s recent growth is due to the lucrative AI sector.
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The S&P 500 is becoming increasingly concentrated in tech stocks, which could be dangerous.
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It’s more important than ever to build a well-diversified portfolio.
- 10 stocks we like better than S&P 500 Index ›
The last few years have been lucrative for the stock market. Major indexes like the S&P 500 (SNPINDEX: ^GSPC), Nasdaq Composite (NASDAQINDEX: ^IXIC), and Dow Jones Industrial Average (DJINDICES: ^DJI) have reached multiple record highs and recently closed out their strongest quarter in years.
Much of this recent growth is thanks to the tech industry, as AI has ushered in a new wave of excitement among investors. Micron Technology alone has earned total returns of more than 650% over the last 12 months, and tech giants like Amazon and Microsoft have spent hundreds of billions of dollars building out data centers.
However, all this growth has also posed a serious risk. The S&P 500 is more concentrated than it’s been in decades, and history suggests investors should exercise caution when choosing where to invest.
The S&P 500 is putting a lot of eggs in one basket
The top 10 largest companies in the S&P 500 make up roughly 40% of the index’s total value, according to data from S&P Dow Jones Indices, which is the most concentrated the market has been since the mid-1960s. Even during the dot-com bubble, the top 10 largest stocks accounted for only about 27% of the S&P 500’s total value.
This is especially concerning right now, given the fact that most of the largest stocks in the S&P 500 are tech companies heavily invested in AI.
Largest Companies in the S&P 500
Market Cap
1. Nvidia
$5.07 trillion
2. Apple
$4.60 trillion
3. Alphabet
$4.34 trillion
4. Microsoft
$2.87 trillion
5. Amazon
$2.64 trillion
6. Broadcom
$1.87 trillion
7. Meta Platforms
$1.67 trillion
8. Tesla
$1.49 trillion
9. Micron Technology
$1.11 trillion
10. Berkshire Hathaway
$1.07 trillion
Data as of July 14, 2026.
The bright side of this concentration is that when tech stocks are soaring, they can lift the entire S&P 500 to record-breaking heights. The other side of that coin, however, is that they can also bring the entire market down if they sink.
The Federal Reserve could potentially complicate matters, too. If the Fed raises interest rates later this year — making borrowing more expensive — tech companies may be more hesitant to spend billions of dollars building out AI infrastructure. If AI growth slows, it could impact the entire stock market.
History says this is the best move right now
Diversification will be more important than ever going forward. The strongest portfolios will contain at least 50 stocks across all market sectors, and ideally, it’s best to hold your investments for at least five years.
The stock market is constantly changing, and today’s most successful companies may not be the top performers decades from now. Only around half of the top 10 largest companies in 1965 are still members of the S&P 500 at all, and those stocks collectively make up around 2.41% of the S&P 500’s total value today.
By investing in a wide variety of stocks, you’re more likely to capture winners across all industries. And if a few of your holdings crash and burn, it won’t sink your entire portfolio.
Should you buy stock in S&P 500 Index right now?
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Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Broadcom, Meta Platforms, Micron Technology, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.
