The S&P 500 is becoming a giant’s club

A not-so-diversified “diversified” index

The latest warning shot from the market’s concentration crowd came from The Kobeissi Letter, which said the 10 largest U.S. stocks now account for a record 41% of the S&P 500’s market cap. That’s a bigger slice than at the dot-com peak in 2000 — because apparently history doesn’t repeat, it just shows up wearing a better AI pitch deck.

Who’s hogging the spotlight?

The usual suspects are doing the heavy lifting here:

• Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, Tesla
• Broadcom, Berkshire Hathaway, and Eli Lilly rounding out the top 10

Kobeissi’s point was simple: if you own the S&P 500, a big chunk of your returns is increasingly tied to a tiny club of mega-caps. Roughly 35 cents of every dollar flowing into the index is going into the so-called Magnificent Seven, and about half of incremental money is landing in AI-linked stocks.

Why investors should care

That kind of concentration can be great on the way up — until it isn’t. Strong AI spending and hyperscaler capex are still powering the trade, but a market this top-heavy can wobble fast if one or two giants stumble.

So yes, the index is still doing index things. But the plumbing underneath is looking a lot like a supercar with a few too many cylinders firing at once.

Big picture: when 10 stocks start acting like the whole market, your “broad” exposure gets a whole lot narrower.