{"id":410507,"date":"2026-01-16T08:25:26","date_gmt":"2026-01-16T08:25:26","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/410507\/"},"modified":"2026-01-16T08:25:26","modified_gmt":"2026-01-16T08:25:26","slug":"why-your-stock-portfolio-may-be-overexposed-to-ai","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/410507\/","title":{"rendered":"Why your stock portfolio may be overexposed to AI"},"content":{"rendered":"

You don\u2019t have to be an AI doomer<\/a> to be wary of the artificial intelligence boom that\u2019s driven the stock market to new heights.<\/p>\n

Eight giant tech companies \u2014 led by Nvidia, Alphabet, and Apple \u2014 now make up 36 percent of the Standard & Poor\u2019s 500 Index\u2019s market value. Since the market bottomed in early April, these eight stocks have soared 57 percent, double the gain of the other 492 stocks in the index, largely on AI optimism.<\/p>\n

But even the biggest bulls can\u2019t shake the worry: Has AI gotten too big?<\/p>\n

Why it matters: For a long time, the S&P 500 was a relatively cheap way to diversify your portfolio without the help of a dedicated investment adviser to pick your stocks. Financial pros generally recommend against putting too much of your money in a small group of investments, as a way of protecting against industry- or company-specific downturns. <\/p>\n

But these days, an S&P 500 fund is less a diversified investment than a bet on whether AI will pay off for a handful of the world\u2019s biggest companies. (The other stocks in the top eight are Microsoft, Amazon, Broadcom, Facebook parent Meta, and Tesla.)<\/p>\n

This increasing concentration<\/a> isn\u2019t inherently bad. AI may well deliver the transformative productivity gains and profits that investors are anticipating.<\/p>\n

\u201cIf the S&P is a proxy trade for AI, that\u2019s kind of what it should be\u201d because the technology\u2019s potential impact is so broad, said Matthew Bartolini, global head of research strategists at State Street Investment Management in Boston.<\/p>\n

Unlike the startups that inflated the dot-com bubble, AI\u2019s pioneers are among the biggest and most profitable companies in the world that can fund the massive investments needed to push toward artificial general intelligence \u2014 a system smarter than we are.<\/p>\n

But: The onus is on individual investors to reassess their diversification strategies when the market\u2019s $63 trillion flagship index is heavily tilted toward a single group of stocks.<\/p>\n

If AI companies stumble, the resulting selloff could drag down the rest of the market. Portfolios that seem safely anchored in broad market indexes could suffer outsize losses.<\/p>\n

Adding to the concentration risk: The AI giants are increasingly intertwined through investments and business deals that could amplify any downturn.<\/p>\n

Microsoft has poured more than $13,7 billion<\/a> into OpenAI and depends on the startup for its Copilot AI products. Amazon, Google, and Nvidia have all invested in Anthropic, OpenAI\u2019s main rival. Meanwhile, nearly every AI company relies on Nvidia\u2019s chips, creating a technological chokepoint.<\/p>\n

For some investors, it\u2019s reminiscent of the interconnected risks that banks faced before the 2008 financial crisis, where institutions were simultaneously lenders, borrowers, and counterparties to each other.<\/p>\n

Catch up: On Monday, Google parent Alphabet topped $4 trillion in market capitalization<\/a>, joining AI chip maker Nvidia as the only current members of the exclusive club.<\/p>\n

For comparison, the combined market cap of the Globe 25 Index of the biggest Massachusetts stocks is just $1.5 trillion.<\/p>\n

After an inauspicious start in AI, Alphabet\u2019s stock has climbed 57.5 percent since September as it narrowed the performance gap with OpenAI and Anthropic, which are both privately held, and rolled out chips to rival Nvidia.<\/p>\n

The company got a boost earlier this week when Apple said it would use the Google Gemini 3 chatbot to beef up its AI capabilities.<\/p>\n

Out of balance: The rally in Alphabet and its peers has been so swift that many investors may not realize just how dominant these companies have become in their portfolios.<\/p>\n

The S&P 500\u2019s weighting system<\/a>, which is based on market capitalization, means that as these tech giants\u2019 stock prices soar, they automatically represent a larger share of index funds.<\/p>\n

It was an eye-opener for me when, as preparation for this column, I looked at my stock funds.<\/p>\n

My biggest equity fund, DFA US Sustainability Core, has 30 percent of its assets in the top 8.<\/p>\n

Six of the largest 10 holdings in BlackRock Tactical Opportunities \u2014 a fund my adviser chose for diversification \u2014 are tech mega-caps.<\/p>\n

The biggest stocks in one of my international funds, another diversification play, are Taiwan Semiconductor Manufacturing and ASML Holding, two chip industry companies with a lot riding on AI.<\/p>\n

Realignment: Diversifying away from mega-cap tech doesn\u2019t require wholesale changes to your portfolio.<\/p>\n

Consider adding equal-weighted index funds<\/a>, which give the same stake to every company regardless of market cap. Adding small- and mid-cap stocks can broaden exposure to domestic economic growth, while international equities reduce reliance on the US tech cycle.<\/p>\n

Funds that focus on value stocks \u2014 those trading at relatively low prices compared with their fundamentals but with potential for a turnaround \u2014 are another hedge against tech stocks commanding high price-to-earnings ratios.<\/p>\n

Real assets such as gold, inflation-protected bonds, along with disciplined rebalancing can further spread risk.<\/p>\n

Final thought: The goal isn\u2019t to ditch the S&P 500 \u2014 just not to depend on it exclusively.<\/p>\n

State Street\u2019s Bartolini believes AI is too promising for investors to run away from.<\/p>\n

\u201cIt would be like skipping railroads or oil companies when those sectors dominated the economy,\u201d he said.<\/p>\n

AI has altered the investing landscape, but the basic principles still apply: stick with your long-term plan, maintain diversification, and, above all, don\u2019t try to time the market.<\/p>\n

\u201cYes, but pennies add up.\u201d<\/p>\n

\u2014 Ryan Maloney, owner of Julio\u2019s Liquors in Westborough, on why he\u2019s concerned that a shortage of one-cent coins<\/a> will hurt profits.<\/p>\n

\ud83e\udef1\ud83c\udffc\u200d\ud83e\udef2\ud83c\udffc Deals<\/p>\n

Heart health<\/a>: Boston Scientific of Marlborough agreed to buy medical device maker Penumbra in a deal valued at more than $14 billion to expand its portfolio of cardiovascular treatments.<\/p>\n

Lapse of luxury<\/a>: As Saks enters bankruptcy, have its Boston stores gone out of fashion?<\/p>\n

Health warning<\/a>: Noubar Afeyan, cofounder of Moderna, a Cambridge vaccine maker, said politicization of research is a threat to scientific progress.<\/p>\n

Cutting red tape<\/a>: Massachusetts will establish regulations to eliminate required insurer prior authorizations for many routine and essential health care services, Governor Maura Healey said Wednesday.<\/p>\n

Shock treatment<\/a>: A class-action lawsuit alleges that electricity supplier CleanChoice is charging above market rates, despite the company\u2019s pledge to adhere to market trends.<\/p>\n

$16.7 billion<\/p>\n

\u2014 Venture capital funding<\/a> raised by Massachusetts startups in 2025, an increase of 12 percent from a year earlier. Other states saw much bigger gains.<\/p>\n

\"ThisThis penthouse unit at 397 Commonwealth Ave. is listed for $15 million.Hacin<\/p>\n

Are grandparents driving luxury home sales in Boston?<\/p>\n

Yes, at least in part, according to Beth Dickerson of Gibson Sotheby\u2019s International Realty. Dickerson told Globe correspondent Marni Elyse Katz that she\u2019s seen increased interest from couples in their late 60s and 70s from other cities who are buying in Boston to be near their grandchildren. <\/p>\n

\u201cPeople are living longer, hanging out, taking the grandkids to sports games,\u201d she said. And the types of properties they\u2019re purchasing: \u201cGrandparents don\u2019t want to be in high-rises where they have to interact with lots of people. It\u2019s all brownstones,\u201d Dickerson said.<\/p>\n

What does $10 million or more get you in Boston these days? Marni Elyse reports:<\/p>\n

A Back Bay townhouse sold for $21 million, and an $18.5 million Beacon Street penthouse went under contract so fast it didn\u2019t even hit the market. A Marlborough Street brownstone sold for $11.5 million \u2014 more than half a million over asking.<\/p>\n

You can check out photos and details of some luxe properties here<\/a>.<\/p>\n

\ud83d\udcc6 On this date in 2001, Wikipedia, the free online encyclopedia maintained by volunteer editors, made its debut.<\/p>\n

\ud83d\udc4b Thanks for reading. Trendlines will be off for the MLK Jr. holiday. See you back here next Thursday. <\/p>\n

\u270d\ud83c\udffc If someone sent you this newsletter, you can sign up for your own copy<\/a>.<\/p>\n

Larry Edelman can be reached at larry.edelman@globe.com<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"You don\u2019t have to be an AI doomer to be wary of the artificial intelligence boom that\u2019s driven…\n","protected":false},"author":2,"featured_media":410508,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[45],"tags":[182,181,507,4910,74],"class_list":["post-410507","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-artificial-intelligence","tag-artificialintelligence","tag-newsletter","tag-technology"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/410507","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=410507"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/410507\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/410508"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=410507"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=410507"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=410507"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}