Here’s a problem that sounds like it shouldn’t be a problem: three companies are worth so much and performing so well that they’re distorting the returns of entire asset classes thousands of miles away.
Nvidia, Microsoft, and Alphabet, collectively valued in the trillions, have become such dominant forces in global equity markets that fund managers investing in emerging markets are raising red flags about concentration risk. When a handful of US mega-caps drive an outsized share of returns everywhere, the whole point of geographic diversification starts to unravel.
The concentration problem, explained
US mega-cap tech companies have constituted roughly 50-60% of recently observed gains in the S&P 500. But the ripple effects extend far beyond American borders.
Emerging market equities have actually displayed stronger returns than the S&P 500 during parts of 2025, trading at meaningfully lower valuations. The MSCI Emerging Markets index carries a price-to-earnings ratio of around 13.7x, compared to the S&P 500’s approximately 22x.
