Market News

The concentration of tech stocks that has fuelled fears of a market bubble is about to get worse, warns a top strategist with Bank of America.

The anticipated mega-IPOs of SpaceX, OpenAI and potentially Anthropic would push the market concentration of technology stocks in the S&P 500 to 48 per cent, said Michael Hartnett, investment strategist with BofA Securities.

““Strong price action, retail mania, slumping vol … so bubbly,” Hartnett said in his weekly note The Flow Show. “Add mega IPOs to AI big boys and market concentration easily surpasses (~48%) bubbles of roaring ‘20s, Nifty 50 ‘70s, Japan ‘80s, TMT ‘90s.”

For years analysts have been worrying about the dominance of the Magnificent Seven over America’s main stock indices. These tech giants — NVIDIA Corp., Microsoft Corp., Apple Inc., Alphabet Inc., Amazon.com Inc., Meta Platforms Inc. and Tesla Inc. — have already pushed technology’s weighting on the S&P 500 to over 44 per cent, according to Bloomberg.

The addition of “the Big Three” would push it well into bubble territory, said Hartnett. The only historical peak it would not exceed is the 1880s railroad bubble, which hit 63 per cent.

SpaceX has already filed for its initial public offering. The largest stock market debut in history, potentially valuing the company at US$1 trillion, could come as early as next month. OpenAI and Anthropic have yet to file, but are reportedly racing to launch their listings by the end of this year.