Daijiworld Media Network – New York

New York, Jan 12: The stock market’s reliance on a handful of tech giants continues to spark debate, with Nvidia and the "magnificent seven" dominating the S&P 500's performance in recent years. Nvidia hit an all-time high earlier this week, only to sell off sharply, pulling indices down in its wake.

For years, the S&P 500 has leaned heavily on these mega-cap stocks. In 2023, the index climbed 24.2 percent, followed by a 23.3 percent gain in 2024. However, when the "magnificent seven" are excluded, the gains shrink dramatically to just 4.1 percent in 2023 and 6.3 percent in 2024, according to DataTrek Research. Nvidia alone accounted for nearly a quarter of the S&P 500’s 2024 gains.

This overdependence is becoming more pronounced. Howard Silverblatt, an analyst at S&P Global, revealed that between the U.S. elections and Christmas Eve, the "magnificent seven" contributed a staggering 86 percent of the S&P 500's returns. Meanwhile, December saw a record 81 percent of stocks underperform the index, noted Michael Batnick of Ritholtz Wealth Management.

Interestingly, the Dow Jones Industrial Average, which is less influenced by these tech behemoths, has slipped back to pre-election levels, reflecting broader market struggles. While mega-cap stocks have buoyed the markets, most other stocks remain stagnant.

The question remains: can these tech giants sustain their momentum? UBS argues that valuation has little correlation with 12-month returns, offering some hope. However, experts agree that a broader market recovery would be more desirable, spreading the gains beyond just a few dominant players.