Why Big Tech stocks' massive gains could be bad news for investors

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Big Tech stocks' massive gains this year have made them even more dominant. That could be bad news for investors.

It's historically rare for a handful of stocks from the same sector to make up such a large part of the S&P 500.

The last time the five biggest companies by valuation accounted for a quarter of the index's total market cap was the 1960s, according to data fromThis is also the first time ever that all five of the largest publicly-listed companies – right now that's Apple, Microsoft, Alphabet, Amazon, and Nvidia – all came from the same industry.

The S&P 500's overall market cap is so concentrated around techs that it's more vulnerable than it was previously to massive price swings, according to Minerva Analysis founder Kathleen Brooks. "When there's a narrow group of leaders, there's a big risk if something bad happens to tech," she told Insider."If, then that becomes bad news for the whole market."

So while Big Techs have powered stocks' surprise 2023 rally, their swelling market capitalizations might eventually prove to be more of a curse than a blessing for investors.

 

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