S&P 500’s Tech Weight Hits Dot-Com Era Levels — But Could Go Higher
The S&P 500 came within a whisker of its 16th record close this year on Friday, while the Nasdaq notched its 18th. Futures point to more highs ahead, though the rally’s staying power remains in question.
Howard Lindzon, co-founder and CEO of StockTwits, notes that investor chatter is dominated by record highs in tech stocks, bitcoin, and gold — sparking debates over whether markets are in a boom, a bust, or something in between. The most crowded trades: bullish bets on tech via the Invesco QQQ Trust, crypto, and gold, with a widespread aversion to bonds.
A chart from Charlie Bilello, chief market strategist at Creative Planning, shows tech now makes up 34% of the S&P 500 — surpassing its peak weighting in 2000 before the dot-com crash.
But another chart from BofA, shared by David Marlin of Marlin Capital, reminds investors that market concentration isn’t new. In 1881, railroads represented 63% of U.S. stocks. While that proved a peak, tech’s dominance today may still be in its early innings.
Ed Yardeni of Yardeni Research told clients the “sky may be the limit” for the Magnificent Seven — provided the economy holds up. Valuations are lofty, with forward P/Es at 22.5 for the S&P 500, 19.9 without the Mag-7, and 29.7 for the Mag-7 themselves. Still, as long as recession risks remain low, Yardeni says those multiples are sustainable.
Lindzon adds that it took 25 years for tech’s share of the index to return to 34% — and with mobile, cloud, and AI, he sees potential for a 70% weighting in the future. The top 10 tech giants, armed with massive cash reserves, global reach, and strong balance sheets, will keep spending on R&D, talent, and resources to stay competitive.
“It might be nicer to have 50 or 100 slightly smaller giants,” he says, “but 10 healthy, paranoid giants is better than two or three.”
