ORLANDO, Oct 30 – Wall Street’s dependence on artificial intelligence (AI) stocks continues to grow as weaker performance in other sectors leaves investors with fewer attractive options.
Technology shares remain a major driver of the US stock market. However, this growing concentration could increase market risks if investor confidence in AI begins to weaken.
According to JPMorgan Private Bank, a group of 41 AI-related stocks has contributed 75% of the S&P 500’s returns, 80% of its earnings growth and 90% of its capital spending growth since ChatGPT launched in November 2022.
The figures highlight how strongly AI-related companies have influenced the US market.
AI Stocks Drive a Large Share of Market Earnings
Technology and communication services are also expected to play a major role in corporate earnings.
According to LSEG estimates, the two sectors are expected to generate 42% of the S&P 500’s forecast US$783 billion in third-quarter earnings.
Their combined share could rise to 45% in the fourth quarter.
Meanwhile, slower growth in other industries appears to be discouraging investors from moving their money away from technology stocks.
As a result, AI-related companies continue to attract attention despite concerns about high valuations and rising investment costs.
Market Declines Highlight Technology Risks
Recent market movements have also exposed the risks of relying heavily on technology shares.
The S&P 500 fell 1.2% last Thursday as concerns over AI spending affected semiconductor stocks.
However, 337 of the index’s 500 companies actually recorded gains on the same day, according to Deutsche Bank analyst Jim Reid.
This showed how losses in a relatively small group of major companies could pull down the wider index.
The pressure continued as the S&P 500 and Nasdaq closed at their lowest levels in more than a month.
The Philadelphia Semiconductor Index also dropped 20% in just over two weeks. Meanwhile, Meta shares fell 20% from their recent peak amid investor concerns over its planned US$97.5 billion equity fundraising to support higher AI spending.
Investors Remain Confident in the AI Boom
Despite the recent losses, major US stock indexes have begun to recover.
Investor confidence appears to have received support from Anthropic’s initial public offering (IPO) filing and other technology fundraising activities.
An IPO is the process through which a private company offers its shares to the public for the first time.
However, the recovery comes amid continuing concerns about whether heavy AI investment will deliver sufficient returns.
The article also highlights the limited investment opportunities outside the technology sector as a possible reason investors remain committed to AI stocks.
Analysts Warn of Possible Market Correction
Market risks remain a concern as companies continue to spend heavily on AI development.
HSBC strategists have adopted a more cautious position by reducing their maximum overweight allocation to equities to a neutral level.
A correction of 10% or more in the S&P 500 remains possible, although such a decline has been uncommon in recent years.
The index last experienced a fall of around 20% between February and April 2025, following market concerns over US tariff policies.
Still, the current AI boom could continue if investors believe technology companies offer stronger growth opportunities than other sectors.
However, heavy reliance on a small group of companies could make any future market downturn more severe.
The Reuters commentary by Jamie McGeever warns that the same investor confidence supporting the AI boom could eventually turn into a wider market decline if sentiment changes.
Source : AWANI | Rewritten By Minutesmy
