Nvidia Stock at 8% of the S&P 500 Index Is a Big Problem for Investors. Let’s Do the Math.

Group 1 - Energy stocks, once dominant in the S&P 500 Index, have significantly decreased in weight, with Exxon Mobil now representing only 0.84% of the index [1][3] - The current market is heavily focused on technology stocks, particularly those associated with artificial intelligence, overshadowing the energy sector [2][4] - There is a risk that technology stocks, including major players like Nvidia, could also see a decline in their market capitalization and influence within the S&P 500 in the future [3][4] Group 2 - Many investors mistakenly believe that investing in an S&P 500 fund provides adequate diversification due to the number of stocks included [5][6] - The reality is that a small number of stocks significantly influence the index, meaning that a major drop in a single stock like Exxon Mobil or Nvidia would have a limited impact on the overall index performance [6][7] - For instance, a 12% drop in Nvidia would have a similar impact on the index as a complete loss of Exxon Mobil, highlighting the concentration risk within the S&P 500 [6][7]