Nick Colas, co-founder of DataTrek, states that technology companies now represent approximately 50% of the S&P 500 index. He suggests this concentration makes the index a less accurate reflection of the broader economy than in the past. Colas attributes this shift to Moore’s law, noting that tech’s current share exceeds the 28% peak of the oil sector in 1980 and the 30% to 32% share held by tech in 2000.
Colas links recent market movements to artificial intelligence, suggesting that expectations of reduced AI funding are impacting real rates. He notes that the historical correlation between oil prices and bond yields, which persisted for roughly a decade, broke in mid-September. Additionally, he highlights that a K-shaped economy persists, where high earners continue to thrive, though he notes that withdrawn IPOs could potentially impact wealth at the top.
To manage risks associated with index concentration, DataTrek advises clients to consider the equal-weight S&P 500. Colas points out that the Invesco S&P 500 Equal Weight ETF (RSP) maintains a tech exposure of about 16%. He also identifies homebuilders as a sector of interest, noting they have lagged since 2025 and could benefit from potential mortgage relief.
The debate over the current market state includes varying perspectives on AI. Apollo chief economist Torsten Slok argued in a September 2025 chart book that the 1990s tech bubble was smaller than the current AI-driven trend. Colas maintains that the market will only broaden when another industry can match the power-doubling capabilities of the current chip-driven tech sector.
