Despite another bumper earnings season from the big US technology companies, the share prices of the some of the Magnificent Seven and chip companies have started to lag the broad S&P 500 index.
This suggest investors may be actively moving or ‘rotating’ away from past market leaders into other areas of the market which offer better value with less concentration risk.
The so-called ‘hyperscalers’, Amazon, Microsoft, Alphabet and Meta Platforms, have committed to spending a combined $565 billion in 2026, up by a third from $420 billion in 2025.
This has spooked investors who fear that a big chunk of their cash flow will be absorbed in the rush to build data centre capacity.
For their part, companies have argued that the risk of underspending is greater than the risk of overspending.
As the chart below shows, investors are not buying into the spending story with AI poster child chip designer Nvidia shares underperforming the broad S&P 500 index and the small cap Russell 2000 index since August 2025.
The latest move lower in the shares came after Nvidia backed away from a proposed $100 billion investment in ChatGPT-owner OpenAI to support new data centres.
Citing unidentified people with knowledge of the matter the Wall Street Journal reported that Nvidia CEO Jensen Huang had privately emphasised the investment was ‘non-binding.’
How dependent is the US market on tech?
At its recent peak the combined market value of the Magnificent Seven represented just over a third of the S&P 500 index. If the next three largest stocks are included, the top 10 companies account for roughly 41% of the entire index.
For historical context, in the 1970s the ‘nifty-fifty’ comprising names like IBM, Kodak and General Motors accounted for 25% to 30% and at the dotcom peak in 2000, the top 10 names made up around 27% of the index.
It is noteworthy that the cyclically focused Dow Jones Industrials index and the small cap Russell 2000 index have outperformed the S&P 500 over the last six months, by 10% and 2%, respectively, suggesting some rotation may be underway.
Investors looking to avoid concentration risks while maintaining exposure to the S&P 500 have other options including an equal weighted version. Though this has underperformed the underlying benchmark by around a third over the last five years.
Martin Gamble: Shares and Markets Writer
Martin Gamble is Shares and Markets writer at AJ Bell. He was previously the Education Editor of Shares Magazine. He has been with the business since 2019.
Martin graduated from the University of Kent in...
