S&P 500 hits new records: Why the tech rally could become a risk

• Historical highs for the S&P 500 due to extreme market concentration on a few tech companies
• Parallels to the dot-com bubble at the turn of the millennium call for caution
• Experts cite broader strategies and alternative market segments as possible approaches to risk management

S&P 500 with strong performance – rally is driven by a few stocks

The market-wide US index S&P 500 gained around 21 percent in the last twelve months; There has been an increase of around 6.1 percent since the beginning of the year (as of the closing price on June 10, 2026). He recently set a new record of 7,620.90 points. But the index’s rally rests on a thin foundation. The price gains of the past few months were primarily driven by a handful of companies in the semiconductor sector. Manufacturers of memory chips and AI-relevant hardware performed particularly strongly. Some of the biggest winners include Micron Technology, SanDisk and Advanced Micro Devices. The technology-heavy NASDAQ Composite also performed exceptionally well. The index rose 25 percent in April and May combined, posting its best two-month result in more than 20 years, according to CNBC. This dominance causes the weighted index to distort the actual performance of the market, as the majority of public companies included in the index lag behind the rapid development.

The current market concentration inevitably brings back memories for market observers of the turn of the millennium and the bursting of the dot-com bubble. At that time, the euphoria surrounding the Internet drove the valuations of technology stocks to astronomical heights before the market collapsed, dragging the broad index down with it. Today, the topic of artificial intelligence continues to act as a catalyst that has pushed the market capitalization of companies like NVIDIA into the trillion dollar regions.

Bank of America strategist sees parallels to the dot-com bubble

While the S&P 500 recently reached new records, only a small proportion of the companies represented in the index reached their own highs at the same time. Michael Hartnett, chief strategist at Bank of America, pointed out in a note to clients that even at the height of the Internet bubble in March 2000, only a few of the S&P 500 stocks had reached new all-time highs. He assumes that the current speculative market phase may not be over yet. However, he sees the development as a further signal that the cycle is approaching its later stage. In his opinion, central banks and rising interest rates could ultimately mark the turning point.

Several market observers are increasingly critical of the strong dependence on a few stocks. An important key figure in this context is the so-called advance-decline line, which measures the ratio of rising to falling stocks. After this indicator increased significantly at the end of March, it has been declining again since mid-April, according to CNBC. Technical analysts often interpret this as an indication that the market’s internal strength is lagging behind the performance of the major indices. Oppenheimer also referred to weaker internal market dynamics in an analysis.

In parallel, BCA Research found that as of May 20, only around 55 percent of S&P 500 members were trading above their 200-day moving average. The strategists at BCA Research see this as a warning signal. Although US stock indices and indices from emerging markets reached new highs, the upward movement was driven by a comparatively small group of stocks. Low market breadth could indicate increased vulnerability of the overall market.

Goldman Sachs remains bullish – but sees increasing dependence on AI-driven stocks

The analysts at Goldman Sachs remain optimistic about the US stock market. In a recent study, the year-end target for the S&P 500 for 2026 was raised from 7,600 to 8,000 points. Based on the status of May 26th, this corresponds to an expected return of around six percent.

At the same time, Goldman Sachs Research increased its profit forecasts for the companies in the index. The influence of companies that benefit from the expansion of the AI ​​infrastructure should be particularly strong. According to analysts’ estimates, around half of the expected profit growth in the current year will come from this area. Despite the improved earnings expectations, Goldman Sachs expects that the valuation of the US stock market will hardly change. Slightly falling yields on US government bonds are seen as a supporting factor. At the same time, however, analysts see several negative factors, including slowing economic and profit growth, doubts about the long-term sustainability of AI-driven profit development and ongoing geopolitical uncertainties.

In the future, profit growth in the S&P 500 will likely depend more on whether large technology companies can successfully monetize their billion-dollar investments in artificial intelligence. According to Goldman Sachs expert Ben Snider, this requires that companies achieve noticeable efficiency and productivity gains through the use of AI that justify the high expenditure on corresponding applications. Although the use of AI in business is still in its early stages, analysts at Goldman Sachs expect the positive impact on productivity and corporate profits to become increasingly noticeable in the coming years.

While the market breadth has narrowed in recent months, the so-called momentum strategy – i.e. investing in stocks that have already risen sharply – has seen a significant upswing. Goldman Sachs Research points out that a combination of high market concentration and strong momentum has often been associated with increased risks for the overall market in the past.

Diversification strategies for portfolio management

In the current market phase, it could be advisable for market participants to critically question the allocation of their own portfolio. The existing cluster risk in the S&P 500 is likely to prove to be an accelerant in the event of a sustained correction in the tech sector, which is why alternative index concepts and geographical diversification could represent a sensible hedge. An obvious option for reducing cluster risks is investing in equal-weight ETFs, in which all 500 companies in the S&P 500 are weighted equally at zero point two percent, regardless of their market capitalization. With this approach, the fluctuation of a single megacap stock loses its dominant influence on the overall performance of the portfolio. In addition, the European stock market with its traditional value stocks offers a valid alternative, as indices such as the EURO STOXX 50 are significantly more influenced by classic sectors such as financial services, cyclical consumption and industry and are therefore less susceptible to technology shocks.

Investors should also keep an eye on how future monetary policy and global interest rates impact growth valuations, as restrictive liquidity could put pressure on tech giants’ valuation premiums.

This is what the experts recommend

Against the backdrop of a strong concentration of stock market profits on a few stocks and the large differences in the performance of individual stocks, Goldman Sachs expert Snider recommends a broader portfolio portfolio beyond pure AI infrastructure stocks. According to Goldman Sachs, an easing of geopolitical risks could particularly benefit cyclically dependent consumer sectors and give them a stronger tailwind than the previous AI winners.

Bank of America chief strategist Hartnett recommends investors gradually prepare for an environment following a possible exaggeration period. In his opinion, stock market history since 1929 has shown that long-term government bonds and defensive stocks and sectors often perform better after the end of large phases of speculation. Of particular interest could be those areas that significantly lagged behind the overall market during the final phase of a market bubble.

Julia Walter, editorial team at finanzen.net

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