“Big Tech Dominance in Stock Market Raises Concerns for Investors”

Investing.com – Since the beginning of this year, shares of big tech stocks like , have risen at a massive pace, sometimes even exceeding 100%, which has increased the dominance of Big Tech in . writes Business Insider.

However, such a strong concentration of high technology in the benchmark index may hide its vulnerability to high volatility, especially since there has never been such a precedent in the history of the US stock market when a small group of companies from one industry would have such an impact on the entire market.

Shares of Apple (NASDAQ:), Microsoft (NASDAQ:), Alphabet (NASDAQ:), Amazon (NASDAQ:), Nvidia and Meta* are currently valued at approximately $10 trillion and account for more than a quarter of the total market capitalization of the S&P 500.

Their growth since the beginning of the year has been double-digit, and Nvidia and Meta have more than doubled in price – all against the background of the boom in artificial intelligence and expectations that the Fed’s interest rate hike will soon be suspended.

The S&P 500 itself is up 8% this year, but its return could be reduced to 2% if high tech is excluded. In addition, it lags behind high-tech, which grew by 22%.

The uniqueness of the current market situation is that the top 5 valuation companies account for a quarter of the total market capitalization of the index, and they all belong to the same industry.

The vulnerability is that stocks in the same industry may face a number of adverse macroeconomic factors: an increase in the Fed’s interest rate, which often hits them harder than stocks of other companies, because they are more dependent on borrowed money.

*Meta is recognized as a terrorist organization in Russia and banned

— Materials from Business Insider were used in the preparation

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