S&P 500's nine-week rally raises concerns over AI and semiconductor dominance

The S&P 500 has hit new highs for nine straight weeks after its March lows, with seven of those weeks marking fresh all-time records. Yet the rally has drawn criticism for relying too heavily on a small group of stocks to drive gains forward. Last Friday, just 20 stocks in the S&P 500 reached their own all-time highs. Of those, 13 were tied to artificial intelligence, highlighting the outsized influence of AI-related shares. Semiconductor stocks, a key part of the tech surge, have more than doubled in value over the past year.

Growth and value funds have both seen strong returns. The Vanguard Growth Index Fund ETF (VUG) climbed 24.8% in the last 12 months, while the Vanguard Value Index Fund ETF (VTV) rose 24.3%. Meanwhile, individual tech firms like Dell (DELL) and Hewlett Packard Enterprise (HPE) experienced sharp price swings following earnings reports. Despite the market’s upward momentum, concerns persist about its narrow leadership. Mike Cintolo, Cabot’s Chief Investment Strategist, remains optimistic about long-term prospects but acknowledges potential short-term volatility.

The S&P 500’s prolonged streak of highs has been fuelled by a concentrated group of stocks, particularly in AI and semiconductors. While broader growth and value funds show solid gains, the rally’s dependence on a few sectors leaves room for caution in the weeks ahead.