The S&P 500 Is Really The “S&P 10” - October 31, 2025

The Stock Markets Are Outperforming Expectations In 2025 Because of These Ten Companies

Happy Halloween to all those that read my articles posted under “Pontifications From Paliwal”! I write for my pleasure, and to clarify and articulate my thoughts on various topics. But, I’d be lying if I didn't admit that I do look at what my viewer counts and engagement levels are on my posts; it feels good to know people are reading and enjoying what I write.  Thank you all for reading. Comments and advice on the writing are always welcome.  

In the spirit of Halloween, what's really spooky is that while the S&P 500 has gone up 18% in 2025, a significant portion of that gain can be attributed to the “S&P 10”, or only ten companies.  Of these ten companies, seven are technology companies whose stellar performance can be explained by their products/sales into the artificial intelligence industry specifically.  The stock market performance this year is tied directly to large amounts of spending on AI technology development and on investments in the infrastructure needed to support AI.  This has people worried that we are in an AI bubble.  A bubble the likes of which we haven’t seen since 1998-2000, during the dot.com heyday.  History shows us that only a few companies had the wherewithal to emerge from that dot.com bubble and last as meaningful companies: Amazon; Ebay; Google, and Netflix, among those.  So there is considerable worry that when the AI bubble bursts the stock market and economy will implode with it.  

For those not familiar with stock market terminology, the “S&P 500” represents the performance of 500 of the largest publicly traded companies in the U.S. It is a market-capitalization-weighted index, meaning more valuable companies have a greater impact on its value. Widely considered the best single gauge of larger U.S. equities, the S&P 500 acts as a benchmark for the overall U.S. stock market and a proxy for the U.S. economy.  Similarly, the  S&P/TSX Composite Index acts as a benchmark for the Canadian stock market and proxy for the Canadian economy.  

Whether you’re an experienced investor or a neophyte who just now learned about the S&P 500, you would think that, by definition, the S&P 500 index is driven by five hundred companies! It is supposed to reflect the value of all five hundred companies in the index, but in 2025 only ten companies are driving that index, hence the term, “the S&P 10”. In other words, if the S&P 500 is performing well, that performance is being driven by only ten companies, while the other 490 companies, that represent a cross-section of the US economy, are under performing.  Even within those ten, it is seven technology companies that have been driving the entire S&P 500 in 2025 ...and those seven companies all are major players in Artificial Intelligence.  

Earlier this week I read that Nvidia just became the world’s first $5 trillion company.  The milestone, which Nvidia reached at Wednesday’s stock market open, comes just three months after the company crossed the $4 trillion mark. It took Nvidia about 13 months to go from $3 trillion to $4 trillion in valuation. Nvidia stock has gained about 50% in 2025 and has been near or at the top of the S&P 500’s best-performing stocks for years as investment in artificial intelligence continues to fuel the semiconductor company’s rocket ride.  Nvidia’s meteoric rise is directly attributable to its product sales in the AI industry. 

Why does this matter?

Many Americans have their retirement savings in 401(K) plans that invest in the US stock market.  Similarly, many Canadians have their retirement savings in an RRSP (Registered Retirement Savings Plan), which is very similar to an American 401(K); these Canadian RRSPs also invest the funds held therein in the US stock markets, and the Canadian stock markets, such as the Toronto Stock Exchange.  For these reasons, the S&P 500 is an important number.  People rely on movement in this index to measure the health of their retirement savings, and as noted above to measure the health of the overall economy.

When Donald Trump was running for President in the 2024 U.S. election, he hinted at implementing tariffs on the US’s trading partners.  Economists immediately reacted negatively to this news, citing that tariffs would cause inflation in the economy as prices of consumer goods would go up. This would adversely impact the stock markets globally, and thus impact people’s retirement savings.  Then in April 2025, when President Trump revealed the first set of details on his tariff plans, the stock markets did indeed react negatively.  A lot of value was lost in those retirement savings that were invested in the stock markets, as economists had first predicted would happen. Since then, because of President Trump’s incoherent rollout of these tariffs, his ever-changing and whimsical views on who is subject to tariffs, and what rate of tariffs would be applied, the stock markets have become desensitized to President Trump’s tariff announcements.  In fact, according to Slickcharts, the total return in the US stock markets (price gain + dividends) for 2025 is about 18%, as of October 24, 2025, despite repeated and shifting tariff announcements from the White House.  Similarly, according to Reuters, the Toronto Stock Exchange is up about 22% in 2025. Those are great returns, well-above the markets’ average returns.  If there is doom n’ gloom forthcoming because of President Trump’s tariffs we haven't seen it yet in the stock markets, or the economy, on either side of the border. 

 But…

Are the markets, the economy, and people’s retirement investments really doing that well?  Or have these inflated indices lulled us into a false sense of security?  Nvidia makes up 7.5% of the S&P 500.  The increase in value of just this one stock, has contributed 20-25% of the index’s total gain in 2025. Does Nvidia's stock itself represent the health of the US stock market and US economy? Of course not! It gets worse: Microsoft makes up 7% of the S&P 500, and its strong stock performance is attributable to tech/AI; Apple  makes up 6% of the S&P 500; Alphabet (Google)  makes up 4%; Amazon also make up 4% of the S&P 500; Meta, Broadcom, Oracle, and Palantir also make up material portions of the S&P 500…all of these companies are players in the AI game, and their respective stock price gains are directly attributable to AI product sales.  The only companies in this “S&P 10” that are non-technology companies are JP Morgan Chase and Berkshire Hathaway, from the banking/finance industry.  Because the S&P 500 is market-cap weighted, the companies with the largest market capitalization move the index the most. These large technology companies have a disproportionate impact on these key measures of market health.  

In the Canadian markets, things are not so skewed towards technology/AI companies.  The TSX has gained around 20-23% year-to-date in 2025. Raw materials stocks have been instrumental in driving the resource-heavy Canadian benchmark’s 23% gains this year; as well, gold prices have surged over 50%. The energy sector, as rising commodity/energy prices help Canada’s large energy companies.  There will be AI-related technology and infrastructure investment in Canada, but we have a much more balanced economy and stock market.  

Prime Minister Carney’s push to end our heavy reliance on the United States will have many benefits.  He’s leading us towards not having all our eggs in the United States basket.  Sell Canadian products and resources into other markets; import our consumer goods from other countries; spend our vacation dollars in other parts of the world; and this article points out, it will be way better in the short term to invest our retirement dollars in Canada, and add some diversity in our portfolios by investing in European or Asian companies.  Go Canada! Elbows Up!

Once again, Happy Halloween - save some of the candy for the young trick or treaters!