Nvidia, Alphabet and Micron Are Holding Up the S&P 500 — Is That a Problem?

TLDR

• The S&P 500’s top 10 stocks now make up nearly 40% of the index — a record high
• Micron, Nvidia, and Alphabet accounted for over 40% of all upward earnings revisions in 2026 so far
• Evercore ISI has set a year-end S&P 500 price target of 7,750, with a bull case of 9,000
• AI-focused sectors (tech, communication services, consumer discretionary) now represent about 60% of the index
• Core PCE inflation rose to 3.3% year-on-year, its highest level since 2023, adding pressure to the broader economy

A small group of artificial intelligence stocks is increasingly driving the performance of the entire S&P 500, according to a new note from investment firm Evercore ISI. The firm warns this concentration creates both opportunity and risk for investors.

A Narrower Market Than It Looks

Strategists at Evercore, including Julian Emanuel, say the S&P 500 is now a “market of stocks” rather than a stock market. That means a few big names are doing most of the heavy lifting, while the broader market struggles.

The top 10 stocks in the index now account for nearly 40% of its total weight. That is a record. The gains seen in the index this year are not being shared equally across all companies.

Micron, Nvidia, and Alphabet alone were responsible for more than 40% of the upward revisions to S&P 500 earnings forecasts for 2026. These three companies also posted some of the strongest earnings surprises in the most recent reporting season.

Micron Technology, Inc., MU

Technology, communication services, and consumer discretionary sectors now make up roughly 60% of the S&P 500. When ChatGPT launched, that figure was just 39%.

AI Is Masking Deeper Economic Pressures

While AI-driven stocks are pushing the index higher, the broader economic backdrop is more troubled. Consumer sentiment is low, oil prices are elevated, and inflation remains sticky.

Core PCE — a key inflation measure — rose to 3.3% year-on-year, its highest reading since 2023. This kind of environment would normally weigh heavily on stock market performance.

But AI demand has offset those headwinds. Evercore says first-quarter 2026 earnings surprises were at levels typically seen only during recoveries from recessions.

The firm maintained its year-end S&P 500 price target of 7,750. Its bull case scenario puts the index at 9,000, driven by continued AI spending and strong earnings growth.

Despite the concentration, Evercore says technology sector valuations remain historically reasonable compared to the broader market. That makes earnings durability the key factor to watch.

However, the firm did flag that narrow leadership increases downside risk. If sentiment shifts or geopolitical tensions escalate, the index could fall back toward its 200-day moving average, which sits around 6,800.

Global Markets Are Feeling the Same Pull

The AI theme is not just reshaping U.S. markets. Technology’s weight in the MSCI Emerging Markets index has risen to 42%, now exceeding its share of the S&P 500.

Taiwan and South Korea have seen their market capitalizations grow to rival India’s, largely because of their exposure to the technology supply chain.

Evercore’s outlook remains tied to one central question: can AI demand stay strong enough to keep earnings growing? So far in 2026, the answer has been yes.

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