S&P 500 Up 2.4% as Tech Giants Drive Market Rally

Last week’s equity market rally was led by a sharp 2.4% gain in the S&P 500 and a 3.7% rise in the Nasdaq 100, driven primarily by strong performances from mega-cap technology stocks such as Apple and Nvidia [1]. These gains brought the S&P 500 closer to its February high and marked the index’s highest level since its peak earlier in the year, while the Nasdaq 100 not only recovered from recent volatility but also set a new record, underscoring growing confidence in growth-oriented equities [2].

Apple contributed significantly to the rally, gaining $400 billion in market value following an announcement of an additional $100 billion in U.S. investment, a move that is expected to shield its India-made iPhones from potential steep tariffs [1]. The company’s performance, along with Nvidia’s, highlighted the outsized influence of the largest firms on overall market trends. Nvidia, in particular, now accounts for 8.2% of the S&P 500 index, the largest single-stock weighting since at least 1981 [2]. This concentration reflects a broader shift in capital toward AI-driven and high-growth sectors, with both hyperscalers and hardware providers benefiting from increased investment in data centers and computing infrastructure.

Despite the broad gains, the rally was not evenly distributed across the market. Twelve S&P 500 companies fell more than 10% in the same week, many due to disappointing earnings or weak guidance. Eli Lilly and ON Semiconductor both fell by double digits, while the Trade Desk plunged 37%, illustrating the growing divergence between top performers and underperformers [2]. Bank of America noted that companies missing both revenue and earnings have seen their stock prices decline at a rate more than three times the 25-year average, signaling increasing vulnerability for those failing to meet investor expectations [1].

The surge in the S&P 500 and Nasdaq 100 also coincided with easing concerns over the U.S. economy, as traders increased their bets on a September Federal Reserve rate cut. Dovish comments from Fed officials helped calm fears sparked by a weak July payroll report, which had raised questions about consumer strength and the central bank’s policy path [2]. Equity strategists, however, caution that the market may be growing complacent. Venu Krishna of Barclays warned that the market will now need support from both earnings and macroeconomic conditions, a dynamic complicated by ongoing trade tensions and the historically volatile August trading environment [2].

While the S&P 500 remains above key support levels and near its 50-day moving average, the index’s performance continues to be heavily influenced by its top ten components, which account for roughly 40% of its total weight. This concentration raises concerns among analysts, who compare the situation to an over-reliance on a single type of diet, where too much focus on a small group of stocks can create systemic risk if those companies underperform or face unexpected headwinds [1].

The Nasdaq 100’s valuation has also reached high levels, trading at nearly 28 times next year’s estimated earnings. This multiple is among the highest since the pandemic-driven rally, with some companies, such as Palantir Technologies, seeing their market values rise to levels comparable with traditional industry leaders like Johnson & Johnson [2]. The surge in AI sector valuations is particularly notable, with companies at the forefront of innovation commanding multiples that reflect investor optimism about their long-term growth potential.

As the market moves forward, the trajectory of the S&P 500 and Nasdaq 100 will remain closely tied to the performance of their largest constituents. While the rally has brought renewed confidence to growth stocks, the divergence between top performers and underperformers highlights the increasing concentration of gains within the index. With AI-related spending becoming a more significant contributor to GDP, the role of large-cap technology stocks in shaping the broader market is likely to continue growing, both as a source of strength and a potential area of risk.