By Martin Baccardax

The biggest stocks in the market are once again dominating performance for the S&P 500, following last week's earnings parade and artificial intelligence spending updates.

That's raising concerns that megacap tech giants are exhibiting echoes to the dot-com era peak of the early 2000s.

With the S&P 500 within touching distance of last week's record high, the benchmark's 10 biggest stocks, eight of which are tech giants with a value north of $1 trillion, are outperforming the rest of the index at the highest rate since March 2000, according to data from RBC Capital Markets.

The top 10 stocks now comprise around 44.1% of the S&P 500's total market value, last pegged at around $57.79 trillion, and account for just over a third of the net income generated by the entire index.

"Market cap share has outpaced net income share since 2021, but the gap between them is almost back to its tech bubble highs," said Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets.

"While we've generally not agreed with the view that the stock market is in the midst of an AI bubble, similar to the (tech bubble of 2000) due to a better earnings foundation, we do think this risk has grown," she added.

The collective performance of the biggest tech stocks has not only driven the S&P 500 to a series of all-time highs this year, but also helped lift the 3-month average of the benchmark's forward price-to-earnings multiple to levels seen only last year and during the market's dot-com era peak.

"The 'big-tech' sectors -- information technology, communication services, and consumer discretionary -- have accounted for nearly 70% of the increase in S&P 500 forward-twelve-month earnings since the end of 2022," said John Higgins, chief markets economist at Capital Economics.

"And the lion's share of that has been generated by firms that you could count on two hands," he added.

That continued over the third quarter, as well.

LSEG data suggests that three of the S&P 500's biggest sub indexes -- consumer discretionary, information technology and communications services -- will generate around 45% of the $597.7 billion in expected third-quarter profits.

Over the three months ending in December, analysts expect those same three sectors, each of which include at least two of the so-called Magnificent seven stocks, to contribute around 47% of the S&P 500's collective earnings total.

That forecast has taken aggregate forward earnings for the S&P 500 to an all-time high of nearly $300 a share, as well.

Ed Yardeni, president and chief investment strategist of Yardeni Research, sees that figure rising to $350 a share by the end of next year on bets that, "AI will deliver on the promise of boosting the productivity and earnings of companies that are the customers of the cloud providers."

"The stock market is currently discounting this version of our 'Roaring 2020s' scenario," he added.

And that means more tech leadership.

"With six of the 'Magnificent 7' firms' Q3 earnings reports in the books, one effect has been to emphasize the ongoing narrowing of the U.S. equity market rally," said Jonas Goltermann, deputy chief markets economist at Capital Economics.

Goltermann sees the S&P 500 rising to around 8000 points by the end of next year, a 17% advance from current levels, but sees forward earnings only rising to $320 a share. That would likely peg the benchmark's multiple at "a roughly dot-com peak-matching multiple of 25x," he said.

But that doesn't necessarily mean tech stocks, or even the broader market, are trading in a bubble that's at risk of a near-term bust, according to Qian Wang, global head of Vanguard Capital Market Research.

"Today's tech stock market leaders are generating real, strong profits," he said.

"However, the market often gets ahead of itself," he cautioned. "When valuations are stretched with high hopes for the future, downside risk often outweighs upside potential."

Write to Martin Baccardax at martin.baccardax@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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November 03, 2025 07:55 ET (12:55 GMT)

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