Big Tech has some 'serious sway' as investors keep a close pulse on AI
AI is a driving force in the U.S. stock market.
Investors' intense focus on artificial intelligence is at times adding to the power of a small club of Big Tech stocks with mega market values to potentially make or break a single trading session for the S&P 500.
Just this past week, AI chip designer Nvidia's (NVDA) second-quarter earnings results and guidance appeared to thrill investors - triggering a 8.7% rally in the company's shares on Thursday that Dow Jones Market Data calculated as a record $441.5 billion jump in its market value, to $5.49 trillion. As the S&P 500 SPX has outsize weightings in Big Tech companies including Nvidia, the chip giant's rally propelled the index higher Thursday, even as the average stock underperformed the S&P 500.
The chart below shows the number of trading sessions over the past few years when the S&P 500 posted a daily gain even as the index saw more decliners than advancers on the day. This year, the S&P 500 is already approaching the total number of such occasions seen in all of 2025.
"The megacaps can have some serious sway," said Kevin Gordon, head of macro research and strategy at Charles Schwab, in a phone interview Friday. This year has seen a bunch of "divergence days" in which the "index does one thing but then breadth does the opposite," he noted.
Big Tech has helped the S&P 500 climb so far in August. For example, a popular exchange-traded fund that aims to equally weight seven closely watched Big Tech stocks held in its portfolio was outperforming the S&P 500's 3% gain this month through Friday.
The Roundhill Magnificent Seven ETF MAGS - which holds shares of Nvidia, Apple (AAPL), Google parent Alphabet (GOOGL) (GOOG), Microsoft (MSFT), Amazon.com (AMZN), Facebook parent Meta Platforms (META) and Tesla (TSLA) - ended Friday with a monthly gain of 4.7% as five of its seven Big Tech holdings have climbed so far in August, according to FactSet data.
The S&P 500 may at times seem relatively calm on the surface despite some violent moves in individual stock prices. But stepping back, the U.S. stock market appears relatively healthy based on corporate profits and the portion of S&P 500 stocks trading above their 200-day moving average, according to Gordon.
About 69% of stocks in the S&P 500 were trading above that key level at the market's close on Friday, according to Dow Jones Market Data. Meanwhile, the Invesco S&P 500 Equal Weight ETF RSP, which equally weights stocks in the index, has rallied 15.2% so far this year. That ETF is beating the top-heavy S&P 500's 12.7% climb in 2026.
The U.S. stock market closed lower Friday, with the S&P 500, Dow Jones Industrial Average DJIA and technology-heavy Nasdaq Composite Index COMP all retreating. That came as Treasury yields climbed after Federal Reserve Chair Kevin Warsh expressed concern, in a speech at the Jackson Hole Economic Policy Symposium on Friday, about inflation being stuck above the Fed's 2% target.
Bond yields BX:TMUBMUSD02Y BX:TMUBMUSD10Y swiftly rose as investors priced in a potential interest-rate hike by the Fed in September to bring down inflation, which weighed on the stock market. Still, the S&P 500 ended Friday just 1.1% below its record closing peak notched Aug. 13, according to Dow Jones Market Data.
"The market is going through a long-tailed investment cycle with AI," said Kevin McCullough, a portfolio consultant at Natixis Investment Managers, in a phone interview Friday.
"I don't necessarily think you're going to get out of the dynamic anytime soon" where there's some "whipsawing between a handful of stocks leading the market" as elements of the AI narrative are challenged, McCullough said. But "owning the value space," including financial stocks, may help dampen some of the volatility stirred up in the "AI complex," he added.
-Christine Idzelis
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