Private equity boss Marc Rowan likes to quip that America has levered its entire retirement system to the performance of Nvidia. With the chipmaker sporting a market capitalisation of more than $5tn, the Apollo Global Management chief executive is not entirely wrong. What’s more, Big Tech’s heft is obscuring emerging weaknesses elsewhere.
According to a recent UBS analysis, 42 stocks are driving the bulk of the S&P 500’s returns; typically, around 100 do. The index is up 12 per cent since the end of March on the back of AI-fuelled tech blue-chips, which also include Alphabet, Microsoft, Apple, Meta Platforms and Broadcom. The equal-weighted version of the benchmark, which in effect turns down the volume on those giant stocks, is up half as much.
The more precarious state of some companies is borne out by a trio of quarterly earnings this week. Take burger chain Shake Shack, which said its like-for-like revenue — which it calls “same-Shack sales” — turned negative in April, as tourism in New York City and other big markets disappointed. An aggressive growth plan amid a softening top line spooked investors, and the shares dropped by almost a third.