S&P 500’s Tech Weight Back at Dot-Com Era Levels — Some See Room to Run
The S&P 500 came within 0.01% of logging its 16th record close of the year on Friday, while the Nasdaq notched its 18th. Futures suggest more milestones could be reached this week, with many traders viewing the path of least resistance for equities as higher — until it isn’t.
Howard Lindzon, co-founder and CEO of StockTwits, says investor conversations are centered on record highs for tech stocks, bitcoin, and gold. The prevailing market posture? Bullish on tech via the Invesco QQQ Trust, bullish on bitcoin and alternative cryptocurrencies, bullish on gold — and a decisive “get me out” when it comes to bonds.
At the center of the current boom-or-bust debate is a chart from Charlie Bilello, chief market strategist at Creative Planning, showing that tech now commands 34% of the S&P 500. That’s higher than its weighting at the height of the dot-com bubble in 2000, before the dramatic market collapse that followed.
Yet Lindzon points to another chart that may temper fears of excessive concentration. Sourced from Bank of America and shared by Marlin Capital founder David Marlin, it shows that in 1881 railroads represented 63% of the U.S. stock market. That dominance ultimately faded, but it also suggests that the current tech cycle may still have a long way to go before peaking.
Ed Yardeni, president of Yardeni Research, is also leaning bullish — particularly on the so-called Magnificent Seven megacap tech stocks. He told clients that “the sky may be the limit” for both these companies and the bull market they’re driving, so long as the broader economy avoids trouble.
He cautions, however, that valuations are stretched: forward price-to-earnings ratios stand at 22.5 for the S&P 500, 19.9 excluding the Mag-7, and 29.7 for the Mag-7 themselves. Still, he believes these multiples can hold if recession odds remain low.
Lindzon adds that it took 25 years for tech’s share of the S&P 500 to return to its 2000 peak of 34%. Now, with the rise of mobile computing, cloud infrastructure, and artificial intelligence, he sees potential for technology to make up 70% of the index in the future.
What could drive such growth? The sheer scale and financial power of the sector’s biggest players. “The 10 largest companies have massive cash reserves, global reach, and strong balance sheets,” Lindzon says.
“They have to spend that money on R&D, people, and raw materials — not only to compete with each other but to protect their market positions. While it might be nicer to have 50 or 100 slightly smaller giants, 10 healthy, paranoid giants is better than two or three.”