On Feb. 23, Nvidia achieved a market cap of $2 trillion. This achievement was important for other companies as well. Nvidia’s growth was responsible for 28% of all the gains of the Standard and Poor’s 500, or the S&P 500, an index encompassing about 80% of the capital in all public American companies. Combined with Meta, Microsoft, and Amazon, the four companies have been responsible for 60% of the S&P 500’s gains.
Nvidia’s growth
In 2024, Nvidia’s stock price already increased by 59%, making it the third most valuable company in the U.S. Nvidia’s growth continued the trend last year when it tripled its value in one year. Capitalizing on the surge in artificial intelligence (AI), Nvidia’s business of selling graphics processing units, which are critical to powering AI, allowed it to rapidly grow to become the juggernaut it is today.
Impact on the S&
The growth of larger companies in the S&P 500 has a larger effect on the total price. This leads to the growth that the S&P 500 sees today — just seven stocks make up 30% of the weighting in the S&P 500, and they are responsible for much of the growth of the index as well. These seven stocks have been some of the best performers in the stock market. If the S&P 500 were not weighted, so that all of the 500 companies had an equal effect on the price, the index would have grown 51% less over the past 15 years.
These seven companies have grown by varying amounts this year.
- Apple: Down 6%
- Microsoft: Up 9%
- Alphabet (Google): Down 2%
- Amazon: Up 15%
- Nvidia: Up 59%
- Tesla: Down 20%
- Meta (Facebook): Up 37%
(Source: Barron’s stock overview (real-time market data) as of 2/29/24)
If the market is to continue to grow, it will rely primarily on the few strong performers.
“We are at a historic extreme in the amount of money in this very small number of stocks,” said Michael Smith, a senior portfolio manager, earlier this month.
