60% of this year's stock market gains come from 5 stocks

The US stock market has once again hit a new high.

Driven by AI and large technology stocks, the S&P 500 index, together with the Nasdaq, set a new record high on Monday, with key players still being those tech giants.

The S&P 500 index has risen by 14% so far this year, with just 5 companies - Apple, Nvidia, Microsoft, Google, and Amazon - contributing 60% of the gains. Nvidia alone contributed 34% to the S&P 500's recent surge.

The market capitalization of these 5 giants now accounts for 25% of the S&P 500 stock market value.

One key reason for the outstanding performance of these 5 giants is that their first-quarter earnings per share (EPS) increased by 84% year-on-year, while other S&P 500 index stocks only increased by 5%.

Furthermore, the strong performance over the past four quarters has led Wall Street analysts to raise their EPS forecasts for these five tech stocks by 38% for 2024. In contrast, EPS forecasts for the other 495 stocks in the index have been lowered by 5%.

Over the past two years, the performance gap between the S&P 500 market-cap weighted index and the S&P 500 equal-weighted index has widened, with the former surging ahead while the latter has remained almost stagnant.

Market breadth has been extremely poor, with Morgan Stanley stating that the proportion of stocks outperforming the S&P 500 in the past month has reached historically low levels.

In the S&P 500 market-cap weighted index, the six tech stocks with market capitalization exceeding $1 trillion rose by an average of about 11.5% in the second quarter, while the rest of the 490+ stocks in the index fell by an average of about 3% in the second quarter.

How long will this "Matthew effect" in the US stock market last?

Especially as what continues to drive tech giants to new highs is the high valuation given to them by investors, not just their performance. Will a bubble appear? This has also become something that investors need to consider next