Geocities website in 1996. GeoCities was one of the first platforms where people could create their own websites and was acquired by Yahoo in 1999.
With the end of baseball season near (sorry Mariners), I felt it was only appropriate to start off with a quote from the late, great Yogi Berra. Like many things Yogi said, I will also date myself a little as I write this message.
When I first started in this business, it was the late 90’s. Something called “the internet” was really starting to take hold. Companies were just starting to embrace this new medium, and the possibilities were seemingly limitless. Almost overnight, stayed, old companies were suddenly tech darlings, simply because they had a website. The Dot.com era had begun!
From January 2nd of 1998 to March 10 of 2000, the tech-heavy NASDAQ skyrocketed 219% (YCharts.com), before plummeting 52% by the end of 2002. Optimism was fueled by the unfettered hope of endless productivity increases and better earnings, all thanks to the internet.
Companies that had no products, much less earnings, saw meteoric rises in their stock prices. Consumers were certain these companies would have infinite returns; they just had to figure out the small issue of what they’d actually sell and how they’d get it to clients. No problem. Right?
You could hardly turn on the TV during that time without seeing an ad for Pets.com and their lovable sock puppet. The company was everywhere from the Macy’s Day Parade to Super Bowl ads. After starting in 1998, the company went public on the NASDAQ in February of 2000, raising over $82 million.
Unfortunately, like most companies of the era, reality was tough. Almost as soon as Pets.com became a household name, the company was gone. As of early November 2000, barely eight months after their IPO, the company closed its doors. Turns out, capitalizing on the internet craze wasn’t as easy as many thought. Last I checked, our friendly sock puppet was delivering the weather report in Omaha.
At this point, you’re probably asking why I’m writing about sock puppets and market frenzies from almost 30 years ago
Well, today’s Artificial Intelligence (AI) boom seems eerily familiar to someone who sat in this seat and watched the rise and fall of Dot.com almost 30 years ago. The same someone who was recommending an S&P 500 index fund to a client in 1999 (some things never change), only to be told they “didn’t want to buy something that was ONLY up 28% the year before.” Nope; can’t make this stuff up.
Is AI cool? Absolutely. Is it here to stay? For sure. Are we already using AI to help with operational tasks and note taking? Yes, and it’s SO cool! With that being said, I can’t say with any modicum of confidence that AI-related stocks deserve to make up the majority of the entire S&P 500 aka the market.
As I write this article (10/22/2025), NVIDIA, Apple, Microsoft, Amazon, Broadcom, Meta (Facebook), and Google are the top stocks in the S&P 500, accounting for 33% of the entire index! That’s right; seven stocks account for one-third of the value of the entire 500-stock index!
You might be asking yourself how that could happen, and it involves a little math. The S&P 500 is a market cap weighted index. Market cap stands for market capitalization, and is calculated by multiplying the price of a given stock by the number of shares outstanding. For example, if Pets.com had 1000 shares outstanding, and their price was $29, then the market cap of the company would be $29,000. If that stock continued to have 1000 shares outstanding and rose to $180/share, then the market cap would suddenly be $180,000.
Some of you are probably saying “wait a minute” right now. If so, gold star, as those stock prices are actually NVIDIA. From January of 2022 to now, the stock price of NVIDIA has risen from $29.41 to $180.29, an increase of 520%. As a result, NVIDIA has become the single largest stock in the S&P 500, accounting for almost 8% of the entire value of the index.
Why does this concern us?
Well, what has powered the S&P 500 forward for the last several years can also drag it down. If reality hits and AI starts to lose its luster, these same stocks can drag the S&P 500 (and other indexes) down in a pretty dramatic fashion.
This is the point in this writing where I’m obligated to remind everyone that a) we don’t believe in market timing, and b) past performance is no guarantee of future returns. We take our responsibilities with your money very seriously, and we want to make some calculated movements within the portfolio when the market environment seems to warrant change.
Over the last several days, you have probably seen a flurry of trades in your investment accounts. In addition to normal rebalancing, we also swapped half of the market-cap-weighted US large cap equity exposure for an investment that equally weights all 500 of the components in the S&P 500.
What does this mean? It means if the S&P 500 is led downward by the companies that currently make up a third of the index, portfolios won’t realize the full downside of such a move. Instead of NVIDIA making up almost 8% of an investment, it makes up 0.2%. We believe this is a prudent move as stewards of your hard work.
As always, we are grateful with the trust you have put in all of us
Please call, text, or email if you have any questions.
Since I started with a Yogi Berra quote, I’m going to end with one I’m confident we all can appreciate:
“A Nickel Ain’t Worth a Dime Anymore.”
Bright Road Wealth Management, LLC (“BRWM”) is a Registered Investment Adviser. Registration as an investment adviser does not imply a certain level of skill or training, and the content of this communication has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority. BRWM renders individualized investment advice to persons in a particular state only after complying with the state’s regulatory requirements, or pursuant to an applicable state exemption or exclusion. All investments carry risk, and no investment strategy can guarantee a profit or protect from loss of capital. Past performance is not indicative of future results.
