Microsoft, Alphabet, Amazon, Meta, Tesla, Apple, and Nvidia stocks have gained a median 43% since January 2023, almost 5x the S&P 500, bolstered by AI optimism
Rarely does a tech-powered stock rally come along that isn't pilloried for the fragility of its foundation.
Context & Ripple Effects
The [[a:1156842|median 43% gain across Microsoft, Alphabet, Amazon, Meta, Tesla, Apple, and Nvidia since January 2023]] marks the moment AI optimism became the market's organizing force, with Bloomberg noting the rarity of a tech rally not pilloried for its foundations. What followed validated the concern: the same names grew to 30% of the S&P 500 by mid-2024, up from roughly 26% at the start of that year.
The rally also funded itself. The four hyperscalers converted their valuation gains into a 50% capex increase to $106B in H1 2024 for AI infrastructure, and by late 2025 the eight biggest tech stocks were driving 60% of S&P 500 gains since the April 2025 bottom — concentration compounding, not correcting.
First-order effects
- Microsoft, Alphabet, Amazon, Meta, Tesla, Apple, and Nvidia hold a valuation advantage roughly 5x the broader market, giving them cheaper currency for the capex and acquisition spending documented through 2024-2025.
- Index investors are now exposed to these seven stocks whether they choose to be or not, as the group's 30%-plus index weight makes the S&P 500's performance dependent on AI sentiment.
Second-order effects
- The $106B H1 2024 capex surge among Microsoft, Alphabet, Amazon, and Meta flows directly to AI infrastructure suppliers — with Nvidia the most visible beneficiary — turning stock gains into order books.
- Concentration at 60% of post-bottom gains pressures fund managers to hold the seven names just to track benchmarks, reinforcing the very buying that drives their outperformance.
Third-order effects
- If the pattern holds, market structure and AI investment decisions merge: a handful of companies' capex plans become a systemic input for index performance, credit, and the broader economy's technology buildout.
- Sustained divergence between seven stocks and the rest of the market sets up the classic concentration risk debate — whether index diversification still functions when a third of the index is one correlated trade.
The trend: Equity markets are concentrating around a handful of AI-infrastructure winners, with each year of the rally since early 2023 deepening rather than diluting their index dominance.