This is the busiest week of earnings season. Microsoft and Meta report Wednesday, Apple and Amazon Thursday. Between them — plus Nvidia, Alphabet, and Tesla — those seven companies now make up nearly a third of the S&P 500. The index hasn’t been this concentrated since the early 1970s.
That’s worth sitting with, because most people own these names without realizing how much. The “Magnificent Seven” account for about 31.5% of the S&P 500. Add the next three and the top ten are close to 40%. The other 490 companies split what’s left. So the “diversified” index fund in your 401(k) is, underneath the label, a big bet on a handful of tech stocks.
This week tests that bet. The market has grown nervous about one thing above all: how much these companies are spending on AI. Alphabet fell about 7% after raising its capital-spending plans, and Tesla fell roughly 15% after its profits missed — even though revenue beat. Microsoft, Meta, Apple, and Amazon report over the next two days, and the same question hangs over each — is the spending paying off yet?
Here’s what we’d tell any client: this isn’t a reason to abandon index investing. Broad, low-cost funds are still one of the best tools most families have. The point is simply to know what you own. These are genuinely strong businesses — the concern isn’t their quality, it’s correlation. When one theme drives most of the index, a single worry can move all of it at once, and “I’m in the S&P 500” and “I’m diversified” stop meaning the same thing.
And the exposure usually hides in plain sight. The same seven names show up in your 401(k) target-date fund, your brokerage index fund, and — for a lot of families — an individual position or two on top. Stack those together and your real bet on Big Tech can be far larger than any single account suggests. (If a single stock has become the biggest thing you own, that’s its own conversation — we wrote about that one a few weeks back.)
At Lake Hills, we don’t try to call the top on any of these companies. We’d rather add up what you actually own across every account, then decide — on purpose, not by default — how much of your future you want riding on seven stocks. Sometimes the answer is “that’s fine.” The point is that it’s a choice.
If you’re not sure how concentrated you really are, that’s worth an hour. Give us a call.
For informational and educational purposes only. Not investment, tax, or legal advice. References to specific securities are for illustration only and are not a recommendation to buy or sell any security. Past performance does not guarantee future results, and investing involves risk, including the possible loss of principal. Lake Hills Wealth Management is an SEC-registered investment advisor.