In this opinion piece, Ben Jang, Portfolio Manager and Head of Fixed Income on our Public Assets team, explains that S&P 500 concentration has created a hidden vulnerability for investors who assume broad diversification simply because an index holds hundreds of names. He cites RBC data showing the 10 largest S&P 500 companies grew from about 19% of the index at the end of 2015 to 40.7% at the end of 2025, and notes that AI-correlated mega-caps span multiple official sectors, from Information Technology to Communication Services to Consumer Discretionary, which can overstate true diversification when investors rely on sector labels alone.
Ben notes that this isn't a call that the largest companies are due to fall, pointing to an RBC estimate that seven AI-oriented stocks drove 52% of the S&P 500's total return in 2025, but rather a question of how much of a portfolio's return depends on a small group of names continuing to deliver the same outcome. He distinguishes cap-weighted and equal-weight S&P 500 exposure from a diversified multi-asset approach, arguing that underperformance against a U.S. mega-cap growth index often reflects a difference in mandate rather than a shortfall.
His takeaway isn't to avoid U.S. equities or AI exposure, but to size it deliberately and pair it with other exposures so a portfolio can withstand more than one outcome.
Read more: There's a risk to equity markets hiding in plain sight | Wealth Professional
