The US stock market is becoming increasingly concentrated in just a handful of stocks. Heading into 2025, the so-called “Magnificent Seven” stocks continue to look strong in terms of market capitalisations. In total, they accounted for over 31% of the S&P 500 and 21% of the MSCI All Country World Index (ACWI), as of the end of December 2024. Of this group, Nvidia, Microsoft, and Apple collectively accounted for a staggering $8 trillion in market capitalisation and about a fifth of the US stock market back in July 2024 – a level unseen since the 1960s.

Today’s concentration, driven by the rapid rise of artificial intelligence (AI) technologies, raises concerns about the diversification and sustainability of these leading stocks. As an active equity-focused asset manager, Comgest looks beyond index performance and aims to offer investors exposure to leading quality growth companies that take advantage of long- term trends.

FEELING THE BENEFIT OF VARIETY

At the end of December 2024, the top 10 market capitalisations of the S&P 500 represented nearly 37% of the entire benchmark. But does this concentration reflect their underlying quality and competitive advantages? These companies’ profits represent a greater share of the benchmark’s total profits compared to their share of market capitalisation, suggesting that profitability is a key factor underpinning their market dominance.

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