The S&P 500 Keeps Hitting Highs — But It’s Just Microsoft and Nvidia Carrying the Entire Market

The stock market’s march to new highs has made the bull market look healthy. Earnings have rolled in, the S&P 500 has continued climbing, and investors can point to a rising index as evidence that corporate America is doing just fine.

The numbers beneath the surface, however, tell a different story.

Since second-quarter earnings season began on July 13, the S&P 500 has added $1.75 trillion in market value, according to Bespoke Investment Group, but nearly 80% of that gain came from the technology sector — and, more remarkably, virtually all of the sector’s advance came from just two companies.

Microsoft (NASDAQ:MSFT | MSFT Price Prediction) and Nvidia (NASDAQ:NVDA) added a combined $1.42 trillion in market capitalization, while the other 71 stocks in the technology sector lost a combined $22.3 billion.

That’s not market breadth. That’s two companies carrying an awful lot of weight.

Two Stocks Are Doing The Heavy Lifting

Bespoke Investment Group’s data shows just how lopsided this earnings season has become. The technology sector added $1.392 trillion in market value, accounting for 79% of the S&P 500’s $1.75 trillion gain. Yet Microsoft and Nvidia alone contributed $1.42 trillion.

In other words, without those two stocks, the rest of the technology sector would have been underwater.

Here’s how the S&P 500’s sectors have changed since July 13:

Surprisingly, the index can continue hitting new highs even while several major sectors are losing hundreds of billions of dollars in value. That’s the mathematical quirk of a market-cap-weighted index: the biggest companies have the biggest influence.

Microsoft and Nvidia aren’t merely participants in the S&P 500. At the moment, they’re increasingly determining where it goes.

A Rising Index Can Hide A Weak Market

This concentration creates a false sense of security. An investor looking only at the S&P 500 sees a market that is rising. That suggests broad participation, improving corporate fundamentals, and widespread investor confidence. But Bespoke’s data shows that the gains since earnings season began have been extraordinarily concentrated.

Communication Services alone lost $299.6 billion in market value — more than the gains posted by either Financials or Energy. Utilities declined by $88.5 billion, while Industrials lost $67.3 billion. Those aren’t signs that every corner of the market is moving higher.

Owning an S&P 500 index fund is supposed to provide diversification across 500 companies and 11 sectors. Investors still get that diversification structurally, but the performance of the portfolio can increasingly hinge on whether a handful of mega-cap stocks continue rising. That works fine when those companies deliver, but it becomes a problem when expectations change.

If Microsoft or Nvidia stumble, their enormous weight means their declines can pull the index lower even if hundreds of smaller companies are performing well. Conversely, their gains can mask weakness elsewhere — exactly what Bespoke’s latest data shows.

Concentration Raises The Stakes For Investors

Granted, Microsoft and Nvidia have earned their market leadership. Both sit at the center of the AI infrastructure buildout, and investors have rewarded them for the revenue and profit opportunities the spending boom created.

The risk isn’t that these are bad businesses; it’s that the market is increasingly dependent on them remaining nearly flawless. When two stocks can add $1.42 trillion in market value while the other 71 companies in their sector collectively lose $22.3 billion, expectations are becoming concentrated alongside market capitalization — leaving less room for disappointment.

Key Takeaway

In short, the S&P 500’s new highs should not automatically be mistaken for broad market strength. The data shows 79% of the index’s gain since July 13 came from technology, with Microsoft and Nvidia adding the vast majority.

Smart investors don’t need to abandon the S&P 500. But they should recognize what they own. Check how much of your portfolio depends on the same handful of AI leaders. Diversification isn’t just about owning more stocks — it’s about making sure two of them aren’t quietly determining the fate of everything else.

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