Nvidia’s ascent means it now makes up 8 per cent of the S&P 500, the largest single-stock weight since records began in 1981.
Such dominance makes investors nervous: if one company sneezes, might the whole index catch a cold? Probably not.
The link between a giant stock and the market is looser than often claimed.
Until recently, Apple was top dog, accounting for 7 per cent of the index.
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Bespoke Investment notes the mantra was “as goes Apple, so goes the market”.
However, Apple has drifted sideways over the last year, hitting no record high since December, while the S&P 500 notched 20.
The index can rally without its biggest constituent, and sometimes even when it lags.
Still, concentration worries are not necessarily misplaced. The largest decile of US stocks now accounts for three-quarters of market capitalisation, the highest on record.
Nearly 40 per cent sits in just 10 names, eight of them tech.
Now, not all tech firms are alike: Amazon is not Nvidia, Alphabet is not Apple. Still, diversified as these firms may be, investors will wonder how much of their future rests on a single theme: artificial intelligence.
