Analysis-US tech stocks' market dominance reaches new heights and presents new risks

By Lewis Krauskopf

NEW YORK, June 3 (Reuters) - The complaint higher successful U.S. exertion stocks has made broader indexes arsenic reliant arsenic ever connected the radical -- and much susceptible should those marketplace leaders travel up.

With stunning gains implicit the past 2 months, the S&P 500 exertion assemblage present accounts for much than 39% of the marketplace capitalization of ‌the wide benchmark index, its highest connected grounds and supra the level it reached during the 2000 Internet bubble.

"If the tiny fig of tech stocks that person been starring this ‌market higher rotation over, by definition, the indexes are going to rotation over," said Matthew Maley, main marketplace strategist astatine Miller Tabak. "And erstwhile the indexes rotation implicit successful a meaningful way, the wealth flows inevitably reverse."

The monolithic build-out to enactment expected booming ​AI usage has lifted nett estimates for semiconductor and different tech companies, and with it their shares.

"There is intelligibly an overarching AI taxable to what is working," said Liz Ann Sonders, main concern strategist astatine the Schwab Center for Financial Research.

While tech has agelong dominated the S&P 500, its caller outperformance bolstered its sway. Since the market's March debased for the year, the tech assemblage soared astir 47%, much than doubling the S&P 500's summation successful that time, led by semiconductors. Micron shares jumped 230% successful that time, portion Intel and Advanced Micro Devices gained much than 160%.

The tech-driven rally has travel contempt headwinds from higher vigor prices, ‌amid the warfare successful Iran, starring to ostentation worries and expectations of ⁠a much hawkish Federal Reserve.

Investors are wary of immoderate benignant of trigger that could undercut the AI narrative.

"The mode they're performing ... is similar you're driving a contention car astatine 200 miles an hour," said Walter Todd, main concern serviceman astatine Greenwood Capital. "It doesn't instrumentality overmuch to origin an mishap astatine that speed."

STRONGER EARNINGS ⁠THAN DOT-COM BUBBLE?

While semiconductor shares person posted eye-popping gains, different tech areas person besides performed well. The S&P 500 hardware group, including Dell, Cisco and Apple, is up implicit 40% since the March low. Software, which was pummeled earlier successful 2026 connected AI disruption concerns, is up 28%, recouping immoderate losses.

The AI taxable extends beyond tech. For example, with Alphabet, Amazon and Meta Platforms -- megacap companies not classified arsenic tech stocks but that walk massively connected ​AI ​infrastructure -- the stock of S&P 500 marketplace worth successful tech and AI-investing companies swells to much than half. Industrial ​and utilities companies are benefiting from operation and vigor request tied to the ‌AI build-out.