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The S&P 500 Is the Most Concentrated Since 1932, According to Goldman Sachs. History Shows What Should Happen Next, but I Think This Time Is Different. Here's Why.
The last time the S&P 500 was this concentrated was back in 1932.
Right now, 10 stocks have an outsized influence on the direction of the S&P 500 index.
Some skeptical investors are starting to think the market may be verging on a bubble.
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Nevertheless, from time to time indexes can be disproportionally weighted by a small cohort of stocks. Right now, that's exactly what is happening in the S&P 500.
Let's explore what concentration levels in the index look like at the moment. From there, I'll break down what generally tends to happen when concentration levels rise, and then make a case for why this time history won't repeat itself.
What do the trends indicate?
Investment banking powerhouse Goldman Sachs recently issued a research report examining concentration levels in the S&P 500 during the past century. The firm found that the influence of the of top 10 stocks in the index, as measured by market capitalization, had reached a level of concentration that hasn't been matched since 1932.
The report found other years featuring unusually high concentration levels, including 1932, 1939, 1964, 1973, 2000, 2009, and 2020. Let's consider some of these periods and see if there are any common characteristics.
Image source: Getty Images.
What happened during the years mentioned above?
Below, I've listed most of the years from Goldman's analysis and annotated them with important historical events during each sequence.
1932 and 1939: These years bookend the majority of the Great Depression. The stock market in 1932 was still recovering after crashing in 1929. The economy was weak, underscored by unemployment and financial hardship. While the market wasn't necessarily concentrated in specific companies, there were some sectors that started to realize new life: New Deal policies instituted by President Franklin D. Roosevelt helped spur demand in areas such as infrastructure and utilities. In addition, the latter years of this period were right before World War II. As the war drew closer to reality, sectors such as manufacturing, defense contracting, and industrials started to have higher levels of concentration.
1973: The 1970s featured multiple oil crises -- one in 1973 and another in 1979. Geopolitical tensions between the Middle East and Western nations reached a breaking point in 1973, ultimately leading to a period of stagflation. Oil shortages and lax interest rates led to soaring prices, anf investors began to flock toward the energy sector given its influence during this period.
2000: The late 1990s and early 2000s were hallmarked by the dot-com frenzy. During the time, internet stocks were skyrocketing, which caused investors to turn to the technology sector in droves.
2009: The most recent major economic downturn in the U.S. occurred between 2007 and 2009. This period, known as the Great Recession, featured a housing crisis, and the bankruptcy of major Wall Street firms such as Lehman Brothers and Bear Stearns. The Federal Reserve instituted policies that included extremely low interest rates to help revive economic activity. As the recovery began, sectors such as technology and financials started to see outsize concentration levels compared to others.
2020: While the COVID-19 pandemic initially sent the economy into a brief tailspin, this global event also spurred a near-overnight transition to a digital-first economy featuring the rise of e-commerce, video communication tools, enterprise software, cloud computing, and cybersecurity. The pandemic actually boosted the technology sector, which garnered a lot of interest from growth investors.
The main takeaway that I gather from the historical periods above is that certain events can have an outsized impact on interest in certain industries. Investors tend to pick and choose which stocks they think could benefit most from these trends -- leading to large cohorts of people essentially chasing momentum in a small group of stocks or a particular sector.
What happened following these periods, and why could this time be different?
When certain megatrends emerge or a singular event causes widespread interest in a specific market or select stocks, some economists (or skeptics) will call it a bubble. Oftentimes, a bubble bursting is marked by a stock-market crash. While not every period is an example of a bubble, a common thread was that each experienced varying degrees of sell-offs. In more recent history, the dot-com bubble and Great Recession did indeed result in devastating stock-market crashes.
Right now, the most obvious megatrend in the stock market is artificial intelligence (AI). During the past two years, numerous technology stocks have had their share prices surge simply because of optimism about AI. Although behavior like this can easily be seen as nearing bubble territory, I think there are some notable nuances.
Many stocks that ran up have since sold off or returned to historical valuation averages. In other words, a lot of AI stocks were falsely characterized as high-growth opportunities out of speculation. These stocks generally experienced only a fleeting period of momentum or heavy day trading, and subsequently cratered.
Right now, the S&P 500 isn't necessarily concentrated in the AI market at large. Rather, among the 10 largest companies in the index, eight are megacap technology businesses -- Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta Platforms, Tesla, and Broadcom. Although AI is the big tailwind for each of these companies right now, all of them are already incredibly diverse organizations offering a multitude of products and services.
In addition, capital markets have experienced quite a decline during 2025 -- mostly due to economic uncertainty and changing narratives about President Donald Trump's tariff policies. Nevertheless, each of the S&P 500 companies cited above still appears committed to investing in AI infrastructure during the next several years. To me, this signals that AI is not just a fad or a bubble, but a movement that the world's largest companies collectively recognize as the next phase of their evolution.
While valuations are near record highs right now, I wouldn't say any of these S&P 500 stocks have sold off to the point of precipitating a widespread crash. For these reasons, I don't think the current concentration in megacap technology stocks will result in a sustained market crash or a prolonged period of economic slowdown.
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Adam Spatacco has positions in Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Goldman Sachs Group, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
