The S&P 500 Index has been scaling new highs, powered by the AI boom, resilient earnings and a still-growing economy. Current trends suggest that the index is no longer a diversified investment and is now heavily concentrated in semiconductor stocks, indicating a concentration issue.
Semiconductors Dominate The S&P 500
According to a detailed analysis by market commentator Bull Theory, the returns of the broad market index depend on the performance of the semiconductor sector. This is because semiconductors now account for 18% of the S&P 500, up 2% from 10 years ago and more than double the peak concentration seen during the dot-com bubble.
Notably, semiconductor companies have accounted for roughly 70% of the entire S&P 500’s market cap gains this year. The PHLX Semiconductor Index (SOX) has gained about 79% since the start of the year and 162.7% over the past year.
The S&P 500 rose about 10% since the start of the year, extending its largest winning streak since December 2023. It has risen for eight weeks in a row. Only half of S&P 500 stocks are trading above key technical levels," the analysis revealed.
