'US Stock Market, Big Tech Weight Increases Further'... Volatility Warning

S&P500 Apple, Amazon and Other Top 5 IT Companies Account for 25% of Market Cap
Tesla Market Cap Surpasses $500 Billion Ahead of Next Month's Inclusion
Giant IT Companies Leading Stock Market Rally May Fluctuate Based on Earnings

[Asia Economy Reporter Kwon Jaehee] Although the two major New York stock markets, the Dow Jones and S&P 500, set new all-time highs and made history, there are forecasts that volatility will rather increase. As the influence of giant IT companies (Big Tech) leading the stock market rise grows, if these companies report disappointing earnings, it could negatively impact stock prices.

According to the Wall Street Journal (WSJ) and Bloomberg on the 24th (local time), the market capitalization of giant IT companies such as Tesla, Apple, and Amazon rose alongside their stock prices. Tesla's stock closed at $555.38, up 6.43% from the previous trading day, and its market capitalization reached $526.4451 billion, surpassing $500 billion (583 trillion won) for the first time ever. On the same day, Apple's market cap was $1.9581 trillion, up 57% since the beginning of the year, and Amazon also recorded $1.5645 trillion, up 69%. The market caps of Microsoft and Alphabet, Google's parent company, also rose to $1.6169 trillion and $1.1949 trillion, respectively.

As market caps increased, the proportion of the five major Big Tech companies?Apple, Microsoft, Amazon, Alphabet, and Facebook?in the S&P 500 index also grew. According to Goldman Sachs, the market cap weight of these companies within the S&P 500, which was 20% last August, recently surged to 25%. This is a 5 percentage point increase in just three months. When Tesla is included in the S&P 500 index on the 21st of next month, the influence of Big Tech companies on the U.S. stock market is expected to grow even further.

The market is expressing concerns about the phenomenon of Big Tech companies leading the stock market. Although Tesla reported profits for five consecutive quarters through its Q3 earnings announced last month and these companies have not yet shown signs of faltering, their high dependence on the stock market means they are vulnerable to sudden impacts. If the stock prices of these companies fall, there is a possibility that the entire market could collapse. The Wall Street Journal (WSJ) evaluated, "It is concerning that the market is shaken by Big Tech stocks." It further pointed out, "If the earnings of these groups are disappointing, it could stimulate stock market volatility."

Prominent Wall Street figures, such as Leon Cooperman, founder of the hedge fund Omega Family Office, have recently expressed concerns about the stock market rally. According to WSJ, in a recent interview, he said, "When the stock market party ends, someone has to pay the bill," adding, "We need to think about who will pay this."