Chart of the Week: US market concentration in uncharted waters
The latest from our global analysts.
Mentioned: NVIDIA Corp (NVDA)
This week’s chart comes from Lochlan Halloway with insights fromMorningstar’s 2026 Global Outlook Report.
The problem with market concentration
In recent years the US market has been carried by seven mega-cap stocks delivering strong returns, but this concentration comes with a hidden cost: less diversification and greater risk.
Such narrow market leadership creates vulnerability. If any of these leaders stumble because of earnings misses, regulatory changes, or other shocks, broad index performance can quickly reset, erasing hard-won gains.
We saw glimmers of this in last week’s volatility, underscoring how reliant markets have become on a singular theme. Whilst there is immense potential in AI there is also much uncertainty.
Nvidia’s third-quarter earnings were good enough to convince the market that the artificial intelligence story still has room to run. But this doesn’t change the fact that AI jitters, and fears of higher-for-longer rates both here and in the US, have roiled global markets in the last few weeks.
Uncharted waters
The ten largest US stocks now account for more than 35% of total market capitalisation, comfortably eclipsing the heights of the dot-com bubble. No one is certain how it will play out, but the concentration in and of itself is undesirable.
What next?
This doesn’t necessarily imply we’re headed for a dot-com-style crash, but it does leave portfolios more exposed than ever to a sentiment reversal or a change in leadership.
Periods of market concentration don’t always end in a selloff, but narrow leadership can precede weaker returns. However, concentration is an imperfect guide to future returns. The global financial crisis, for instance, was not preceded by narrowing market leadership.
In such environments, investors should consider diversifying beyond the dominant names. Diversification remains the only “free lunch” in investing. In an environment where a few stocks set the tone for the entire market, maintaining exposure across sectors, regions, and styles is one of the few dependable ways to manage risk and to capture opportunities if leadership broadens out again.
Morningstar’s 2026 Global Investment Outlook is available here.
You can find previous editions of Chart of the Week here.
