If you’re in the “stock market is in a bubble” camp, then the components of the S&P 500 Index (^GSPC) are your best bet.
The top 10 stocks now account for about 32% of S&P 500 gains and more than 41% of total market capitalization, the highest levels since at least 1980, according to new data from Barclays strategist Venu Krishna.
The “Big Seven” stocks are the main drivers of concentrated market power. These seven companies – Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL), Meta (META), Tesla (TSLA), Nvidia (NVDA) and Apple (AAPL) – are essentially driving the AI boom.
The stocks are up an average of 21% this year, according to Yahoo Finance data, compared with the S&P 500’s 15% gain. Alphabet topped the list with a 62% gain on optimism about its new Gemini 3 model.
In turn, the S&P 500’s valuation has reached levels that most bulls consider to be on the high side. Krishna’s research shows that relative to 10-year valuation history, the S&P 500 is currently in the 91st percentile.
Deutsche Bank strategist Adrian Cox told me on Yahoo Finance’s opening bid that “complacency” could fuel an AI bubble (video above).
Read more: How artificial intelligence, unemployment and interest rates will impact stocks and investing next year
Indeed, despite the risks investors have had to take this year, complacency appears to have set in.
Remember the “Liberation Day” tariff spectacle in April? The day after President Trump announced sweeping tariffs on April 2, the S&P 500 fell 4.8%. The Dow Jones Industrial Average (^DJI) plunged 1,679 points.
The tariffs are now in effect, but are not as severe as initially advertised.
Recent disappointments from AI darlings CoreWeave (CRWV) and Oracle (ORCL) have begun to cast doubt on the near-term future of the AI industry.
“I think there will be considerable divergence in the AI industry in 2026,” Tom Essaye, founder of Sevens Report Research, said at the bid opening.
Alphabet is Essaye’s top choice for AI in 2026, though he acknowledged there may be winners and losers in next year’s “Big Seven” complex.
“I think companies like Oracle [are] “It’s not overextended financially, but the amount of spending associated with open AI is a surprise, and I think a company like this could be in trouble,” Essaye added. “There’s going to be some pretty serious disagreements.” We saw that in the last two months of 2025. I think this situation will get worse in 2026. “
