Opinion: This is the stock market for the very rich, and the rest of us follow suit.

Focusing on the valuations of these companies also helps convey how important they are to the market. In 2023, the trillionaire lived up to his name, adding over $5 trillion to his SPX market cap in the S&P 500. This equates to nearly 65% ​​of his annual gains stuck in our retirement accounts and index fund statements. Dow Jones Market Data said he could only find one other example of such a concentration of annual market returns in 2020, and it was in the same group of companies.

Their power within the index far exceeds their market cap growth, at least if you exclude Tesla. Nvidia last year ended the S&P 500’s earnings slump, and job cuts at Big Tech companies spared American companies from seeing their record profit margins fall along with inflation. By all accounts, this small group of companies is contributing to his 2023 market recovery and is also at the core of his predictions for 2024 and beyond.

Looking at all the numbers showing the influence of trillionaires in the S&P 500, I wonder if the investment theory behind the decades-long rise of S&P 500 index funds – random variance and the strength of numbers – is under threat. I wondered if that was the case. In MarketWatch’s new podcast “On Watch,” premiering today, Deep Dive investing columnist Phil Van Dorn tells me there’s no need to worry.

“The S&P 500 is self-correcting. It rewards success,” Van Dorn said. “NVIDIA has skyrocketed in the last year due to essentially dominating a new category of important high-tech products, but it now accounts for a much larger index than it did before. If that changes over time, it will likely gain market share from Nvidia. “In order to take away the market share, the weight of other companies will go down and the weight of other companies will go up.”

While that may hold true in the long run, it will be difficult for new rivals to compete with incumbents with such strong fundamentals and sufficient capital. And short-term pain could be in store. I have expressed doubts about the immediate possibility of an artificial intelligence windfall that will surpass Nvidia in 2024. Most of the new revenue that cloud providers Amazon, Microsoft, and Google collect will match the cost of building their AI capabilities. If these costs squeeze Big Tech’s margins, margins will expand beyond record levels in the AI ​​era, while many other sectors lose out on the inflationary gains that have pushed profits to record highs. Wall Street’s hopes that it will do so will be deferred at best.

And then there are existential questions. Do you want the market and economy to reflect these companies? As they use AI to automate more functions while laying off employees, many parts of Silicon Valley Software is being developed to allow the same department to do the same thing. Are higher rates of return a worthwhile trade-off for the potential disruption of the labor market?

A company that makes you think deeply about questions like this deserves a better nickname than a bunch of Hollywood gunslingers. Trionaires deserve scrutiny as they push the market into an uncertain future. Although antitrust laws do not apply to the stock market, these companies actually appear to dominate the public market.