Bank of America flags market concentration
Concerns over a possible artificial intelligence stock bubble are growing as a small group of AI-linked companies takes up an unusually large share of the U.S. equity market.
Bank of America strategists warned that concentration in leading AI stocks has reached levels similar to those seen before earlier market bubbles burst.
AI Big 10 reaches 41% of the S&P 500
The group identified by Bank of America as the “AI Big 10” now represents 41% of the S&P 500.
That share is comparable to the weight held by technology and telecom companies during the dot-com bubble.
The companies in the group are Nvidia, Microsoft, Alphabet, Amazon, Meta, Apple, Tesla, Broadcom, Micron and Advanced Micro Devices.
Nasdaq delivers a powerful second quarter
The warning follows a sharp rally in technology shares during the second quarter of 2026.
The Nasdaq Composite surged 21.4%, marking its strongest quarterly performance since the post-pandemic rebound of 2020.
The move was driven largely by intense investor demand for companies tied to artificial intelligence infrastructure.
Semiconductors lead the rally
Chip and hardware stocks were among the biggest winners of the AI trade.
Advanced Micro Devices and memory supplier Micron climbed to record highs as investors bet on continued demand for semiconductors, data centers and computing capacity.
The momentum in technology was also strengthened by the mid-June IPO of Elon Musk’s SpaceX.
June pullback shows some caution
The rally was not entirely uninterrupted.
The Nasdaq Composite fell 2.8% in June as some investors moved money into small-cap stocks and questioned the scale of Big Tech’s AI capital spending.
Even so, the broader quarterly advance remained strong enough to keep AI at the center of market leadership.
Third quarter could test the trade
The current quarter may determine whether the AI rally can keep extending or begins to lose momentum.
One challenge is that the main drivers of the 2026 AI trade are now widely understood, which may reduce the chance of major positive surprises during earnings season.
Another risk comes from monetary policy. More hawkish comments on interest rates from new Federal Reserve Chairman Kevin Warsh could pressure high-valuation AI stocks.
Investors question the next phase
Lee Munson, chief investment officer at Portfolio Wealth Advisors, said the rally may continue, but the story around it could shift.
“I think the gains can continue. But I think that the narrative is going to change a little bit,” Munson said on Yahoo Finance’s Opening Bid.
“This is less about the earnings bubble in Micron … But I think investors are starting to talk about why we have the Magnificent Seven stocks becoming the Lag Seven — what are people getting for buying all those pickaxes and shovels.”
