Partner Perspectives — 5 February 2026
In the shadows of giants
Navigating the long-term dynamics of performance and concentration in US equities
By Tim Edwards
Highlights
The 10 largest companies in the S&P 500 represented almost 40% of the index by mid-2025, a level of concentration not seen since the mid-1960s.
While the past does not guarantee the future, we can gain perspective by examining what happened last time 10 companies held a similar index weight.
History shows a nuanced relationship between concentration and market performance and illustrates how changes in leadership can impact markets and their benchmarks.
The concentration of US equity market capitalization in a select few mega-cap companies has reached levels not seen for more than half a century due to unprecedented investment in rapidly advancing and highly disruptive technologies. The potential risks and opportunities resulting from this market concentration may find parallels in historical trends, the examination of which offers insight into the continued relevance of broad, capitalization-weighted benchmarks such as the S&P 500®.
More than 12 years ago, CNBC’s “Mad Money” host Jim Cramer helped popularize the acronym “FANGs” for a select group of high-growth, technology-driven stocks that dominated their market segment. Other market participants and commentators subsequently observed and grew concerned about the narrow leadership within US equity markets. The monikers and composition have evolved, but the overall outperformance by the largest US companies was almost unchallenged throughout, and the distribution of market capitalization in the US equity market became increasingly concentrated as a result. By mid-2025, the largest 10 companies in the S&P 500 represented almost 40% of the index, a level of concentration not seen since the mid-1960s.
Market participants are now considering the implications of this concentration. Does it represent a systemic risk for overall markets? Is a market-capitalization-weighted approach to investing (or benchmarking) still appropriate? What might happen if the current AI-fueled enthusiasm proves valuations are too optimistic? The past does not guarantee the future, but we can gain perspective by examining what happened last time 10 companies held a similar index weight.
The following chart illustrates the individual and cumulative weights of the earliest cohort of “top 10” companies, both as they were initially on June 30, 1965, and as they evolved over the following 60 years. To create the second chart, we included the subsequent weights of spinoffs and demergers from the initial 10 companies, including AT&T’s dissolution into a multitude of “Baby Bells,” for example. Weights following mergers were continued at pro rata proportions according to each merger’s terms and conditions.1 The aggregate performance of the June 1965 top 10 cohort was underwhelming. Three entered bankruptcy proceedings, all fell to represent much smaller weights, and several represent potential business school case studies in “what went wrong” with once widely admired and dominant US corporations.
1 This exercise required a somewhat manual and discretionary approach. Overall, the weights of 35 different companies are represented as the successors or progeny of the original 10, with S&P Dow Jones Indices’ proprietary data complemented by public news sources and official records where necessary to determine which later companies represented the appropriate continuations.
These companies represented almost half of the index at the starting point, and many remained in the index, performing poorly over the next 60 years. It might seem likely, therefore, that the subsequent performance of the S&P 500 would also be disappointing. However, the opposite was true — albeit after a rocky start.
Overall, there is a mildly positive statistical correlation between changes in concentration levels and index performance, and this is particularly evident during two periods: the late 1990s and the early 2020s, when both concentration and prices surged. There are also periods when these moved in opposite directions, both in the short term and over the course of decades.
Changes in concentration can occur in various ways, indicating that the relationship between concentration and market performance is quite subtle. Concentration will decrease if the largest stocks perform relatively poorly, and it can also decrease when smaller index constituents perform unusually well. Both may happen at the same time, or neither. Over longer periods, a changing of the guard among the cohort of the largest companies may initially be associated with a decrease in concentration (as the old guard falters to lower rankings), followed by an increase in concentration as the new entrants expand their footprint at the top.
The following chart shows the rise of the “June 2025 top 10” cohort (the 10 companies with the largest weights in the S&P 500 by the 2025 calendar midpoint) over the same six-decade period that we examined earlier. We use corporate predecessors, where appropriate, to represent the initial form of the included companies.2 Even including predecessors, none of the 10 were index members at the start; their entry times and weights are shown in the following table. The average constituent joined the S&P 500 around a quarter of a century ago, with an average starting weight of 0.58% and an average maximum subsequent weight of 4.37% — a more than sevenfold increase. Simple arithmetic confirms that this means each constituent’s growth in market capitalization was many multiples of the market’s return during their tenure.
2 To offer a few illustrative examples, Meta’s initial weight is represented by what was then known as Facebook; we show the combined weights of both Chase Manhattan Bank and JP Morgan & Co. prior to their combination as JPMorgan Chase, and we include both share classes of Alphabet (formerly Google) from the point they were both included in the S&P 500.
To emphasize the point, the overall S&P 500 was not excessively affected by its underperforming heavyweights, because it included about 490 other companies. A rare select few among these delivered truly exceptional returns, which drove the entire market higher. In approximate terms, just 10 of them are responsible for one-third of the market’s subsequent overall growth.3
This gives an important perspective on the merits (or demerits) of weighting benchmarks or investments according to market capitalization. At first glance, capitalization weighting may seem disadvantaged; the long-term history of capital and stock markets suggests that the current leaders will eventually face challengers. At least statistically, today’s cohort of the very largest companies is unlikely to represent the very best-performing stocks of the future. If they do flounder, their weights in the benchmark will naturally decline. Future leaders may already be included among the relative minnows in the index, in which case, a capitalization-weighted approach ensures both initial participation in their gains and a future weight that grows in proportion to their relative outperformance.4
An adaptive approach to ride waves of change
Markets, and the benchmarks that measure and reflect them, are anything but static. They evolve in response to shifting economic landscapes, technological advancements and investor preferences. Those with a crystal ball may be able to achieve extraordinary returns if they can identify the next generation of giants. Yet most of us are absent such foresight; it may prove wiser to ride the waves of change than to position for a perfect storm. As illustrated, a broad-based, capitalization-weighted approach may continue to offer an efficient way to evolve and adapt with the emerging contenders as they compete to become the next titans.
3 This approximation ignores stock issuances, buybacks, dividends, the impact of other index adds and drops, and several other factors, but it is an informative heuristic; if those companies entered at weights that summed to about 6%, and they now represent 40% of the total market cap of the index, then they were approximately responsible for adding the difference (i.e., 34%) of the total.
4 It is perhaps worth pointing out that although other changes may be necessary, maintaining market capitalization weightings does not require turnover to achieve these increases and decreases in weights — they simply rise and fall in proportion to the associated price changes among constituents.
Next up: Learn more about how investors combine index funds, the building blocks for portfolio construction, to achieve outcomes that meet their unique risk profiles and convictions, and how even greater diversification is just around the corner.
This article was authored by a cross-section of representatives from S&P Global and in certain circumstances external guest authors. The views expressed are those of the authors and do not necessarily reflect the views or positions of any entities they represent and are not necessarily reflected in the products and services those entities offer. This research is a publication of S&P Global and does not comment on current or future credit ratings or credit rating methodologies.