4 ms·

NVidia makes up 7.5% of the SP500. If it lost 50%, it would be a 3% loss for the index. The concentration is bad, but it would not cause a drop of 50% retiremen

NVidia makes up 7.5% of the SP500. If it lost 50%, it would be a 3% loss for the index. The concentration is bad, but it would not cause a drop of 50% retirement funds by itself. If you take an all world index, it's even less. Still, if NVidia lost 50% of their market share, we would probably see a big collapse of the stock market. EDIT: to note, the top ten companies in SP500 make up an unprecedented concentration but they're not "mostly AI".

bdangubic 3mo ago
how are they not “mostly AI”?
- riffraff 3mo ago
  Amazon, Microsoft, Meta, Alphabet sell a lot more things than AI. They were huge before and would still be huge after. Do you think iphones and windows™ will stop selling once the ai bubble pops?
conartist6 3mo ago
Idunno man. Am I the only one that remembers the day the first DeepSeek model came out? It wasn't like, "Nvidia took a hit and everyone else was fine". It was more like, "One or two companies were fine, and ALL others took a hit"
kipchak 3mo ago
Regarding unprecedented concentration, wasn't the nifty fifty era comparable for the top 10, about 40%?
- riffraff 3mo ago
  I frankly don't know, the "unprecedented" is something I read in articles but haven't actually investigated.
  - kipchak 3mo ago
    Looking at for example 1965, the top 10 of the S&P500 were, rounded, ATT 9%, GM 7%, Exxon (4%) IBM (4%) DuPont (3%) Texaco (3%) Sears (3%) GE 2%, Kodak 2%, Gulf 1%, for a total of 38%. This is pretty close to current concentration, but the current top 10% is basically all technology except for Eli Lily at 1.5%, so in that sense it's arguably unprecedented. There's a good chart here on page 5 of top 10 weights over time, and on 6 of how the 1965 top 10 fared to 2025. https://corporate.vanguard.com/content/dam/corp/research/pdf/partner_perspectives_unlocking_potential_spglobal_vanguard.pdf https://corporate.vanguard.com/content/dam/corp/research/pdf...
rockskon 3mo ago
It is unlikely that a 50% drop in NVidia wouldn't be paired with a significant drop in the valuation of every other company heavily invested in AI.
- burningChrome 3mo ago
  Unless they too were somehow tied into Nvidia. This is what caused the 08' crash. Everything was all tied together so as one massive bank failed it sent a cascading ripple effect through the entire industry which became a sort of black hole that took down many seemingly stable, profitable banks with it. I can easily see the same happening with AI.
- riffraff 3mo ago
  Of course, but the top ten that make up >30% of the market don't just sell AI. If all of those lost 50% it would be a 15% drop in the index, painful but not jumping-off-building bad
  - rockskon 3mo ago
    What of most of the rest of the US economy thats keeps trying to shoehorn AI into their workflows and, more importantly, whose stock prices are buoyed by the prospect of theoretical AI-related productivity gains?
krashidov 3mo ago
"This tree only makes up 0.0001% of the forest. If it is lit on fire, the forest will be fine"
- 6510 3mo ago
  I have this cheap B movie in my head with a primitive people living on an island. They compete in hunting, fishing, building boats, houses, cutting trees, growing crops etc they use sea shells as currency. Someone finds a spot with countless sea shells, 95% of the population spends their days digging up more and more. Almost everyone is insanely rich, everyone except from the dumb people still hunting, fishing, building boats, houses, cutting trees, growing crops etc
hnfong 3mo ago
> EDIT: to note, the top ten companies in SP500 make up an unprecedented concentration but they're not "mostly AI". They're mostly either AI proper, or hardware manufacturers benefitting from AI boom, or provide cloud services to AI companies...
matwood 3mo ago
An AI collapse would represent a generational buying opportunity for companies like Meta, Google, and MS. It would be bumpy for a bit while things unwind, but eventually all this FCF they have been dumping into AI would start dropping to the bottom line instead. It's like when Meta stopped dumping money in Reality Labs, but on a much larger scale.
- throwaway85825 3mo ago
  For it to be a buying opportunity would require the mega corps to continue growing post bubble pop. This is questionable given how large they already are.
  - oblio 3mo ago
    And a lot of their apparent growth post 2022 is AI, but most likely at subsidized, unsustainable prices. So demand that isn't real. Plus apparently at least for Google, but from other news sources I've seen, at least Amazon and Oracle have basically mortgaged their future in other business units to fund AI, so it's likely many of these other business units will underperform (or already are). So lots of new debt, unverifiable growth that could be shady, coupled with a slow down of their other businesses could be a really bad combo.
mhh__ 3mo ago
A risk in this situation is that in names that are dominated by passive flows there is a pro-cyclical effect where because the name is valued in terms of the overall index but is also part of said index that you end up with a positive feedback loop - which will eventually be arrested by speculators.

bdangubic 3mo ago

how are they not “mostly AI”?

riffraff 3mo ago
Amazon, Microsoft, Meta, Alphabet sell a lot more things than AI. They were huge before and would still be huge after. Do you think iphones and windows™ will stop selling once the ai bubble pops?

conartist6 3mo ago

Idunno man. Am I the only one that remembers the day the first DeepSeek model came out? It wasn't like, "Nvidia took a hit and everyone else was fine". It was more like, "One or two companies were fine, and ALL others took a hit"

kipchak 3mo ago

Regarding unprecedented concentration, wasn't the nifty fifty era comparable for the top 10, about 40%?

riffraff 3mo ago
I frankly don't know, the "unprecedented" is something I read in articles but haven't actually investigated.
- kipchak 3mo ago
  Looking at for example 1965, the top 10 of the S&P500 were, rounded, ATT 9%, GM 7%, Exxon (4%) IBM (4%) DuPont (3%) Texaco (3%) Sears (3%) GE 2%, Kodak 2%, Gulf 1%, for a total of 38%. This is pretty close to current concentration, but the current top 10% is basically all technology except for Eli Lily at 1.5%, so in that sense it's arguably unprecedented. There's a good chart here on page 5 of top 10 weights over time, and on 6 of how the 1965 top 10 fared to 2025. https://corporate.vanguard.com/content/dam/corp/research/pdf/partner_perspectives_unlocking_potential_spglobal_vanguard.pdf https://corporate.vanguard.com/content/dam/corp/research/pdf...

rockskon 3mo ago

It is unlikely that a 50% drop in NVidia wouldn't be paired with a significant drop in the valuation of every other company heavily invested in AI.

burningChrome 3mo ago
Unless they too were somehow tied into Nvidia. This is what caused the 08' crash. Everything was all tied together so as one massive bank failed it sent a cascading ripple effect through the entire industry which became a sort of black hole that took down many seemingly stable, profitable banks with it. I can easily see the same happening with AI.
riffraff 3mo ago
Of course, but the top ten that make up >30% of the market don't just sell AI. If all of those lost 50% it would be a 15% drop in the index, painful but not jumping-off-building bad
- rockskon 3mo ago
  What of most of the rest of the US economy thats keeps trying to shoehorn AI into their workflows and, more importantly, whose stock prices are buoyed by the prospect of theoretical AI-related productivity gains?

krashidov 3mo ago

"This tree only makes up 0.0001% of the forest. If it is lit on fire, the forest will be fine"

6510 3mo ago
I have this cheap B movie in my head with a primitive people living on an island. They compete in hunting, fishing, building boats, houses, cutting trees, growing crops etc they use sea shells as currency. Someone finds a spot with countless sea shells, 95% of the population spends their days digging up more and more. Almost everyone is insanely rich, everyone except from the dumb people still hunting, fishing, building boats, houses, cutting trees, growing crops etc

hnfong 3mo ago

> EDIT: to note, the top ten companies in SP500 make up an unprecedented concentration but they're not "mostly AI". They're mostly either AI proper, or hardware manufacturers benefitting from AI boom, or provide cloud services to AI companies...

matwood 3mo ago

An AI collapse would represent a generational buying opportunity for companies like Meta, Google, and MS. It would be bumpy for a bit while things unwind, but eventually all this FCF they have been dumping into AI would start dropping to the bottom line instead. It's like when Meta stopped dumping money in Reality Labs, but on a much larger scale.

throwaway85825 3mo ago
For it to be a buying opportunity would require the mega corps to continue growing post bubble pop. This is questionable given how large they already are.
- oblio 3mo ago
  And a lot of their apparent growth post 2022 is AI, but most likely at subsidized, unsustainable prices. So demand that isn't real. Plus apparently at least for Google, but from other news sources I've seen, at least Amazon and Oracle have basically mortgaged their future in other business units to fund AI, so it's likely many of these other business units will underperform (or already are). So lots of new debt, unverifiable growth that could be shady, coupled with a slow down of their other businesses could be a really bad combo.

mhh__ 3mo ago

A risk in this situation is that in names that are dominated by passive flows there is a pro-cyclical effect where because the name is valued in terms of the overall index but is also part of said index that you end up with a positive feedback loop - which will eventually be arrested by speculators.