Key Takeaways
- Technology stocks have generated 85% of the S&P 500’s 10% year-to-date gain in 2025
- Nvidia (NVDA) stock accounts for 9% of S&P 500 market cap and delivered 20% of index returns
- Investment bank characterizes current market as dominated by a single AI-focused trade
- First quarter earnings surged 17% while capital expenditures jumped 38% annually
- Goldman projects S&P 500 at 7,600 by year-end, indicating minimal room for additional gains
While the S&P 500 has posted a solid 10% advance in 2025, Goldman Sachs is waving a cautionary flag about the increasingly concentrated nature of this rally.
According to a May 15 research note from Goldman analyst Ben Snider, technology sector stocks have single-handedly generated 85% of the benchmark index’s year-to-date performance. When technology is excluded, the remaining S&P 500 components have managed only a 3% gain.
Nvidia (NVDA) stock has emerged as the most significant individual contributor. The semiconductor giant now commands 9% of the S&P 500’s total market capitalization and has been responsible for one-fifth of the entire index’s return in 2025.
Goldman characterized the current market environment as increasingly concentrated around a singular investment thesis: artificial intelligence. The firm’s momentum factor indicator has surged 25% over the trailing three-month period, marking one of the most dramatic upward movements in historical data.
The worry extends beyond mere concentration levels. Goldman referenced comparable market episodes from 1998, 1999, 2015, and 2021, when powerful momentum-driven rallies ultimately reversed course and resulted in deteriorating broader market performance.
Strong Earnings Provide Foundation for Rally
Goldman emphasized that the current market advance is grounded in fundamental performance rather than pure speculation. S&P 500 constituents delivered 17% year-over-year earnings expansion in the first quarter when adjusted for exceptional items.
Forward-looking 12-month earnings projections have climbed 13% year-to-date, even as valuation multiples measured by price-to-earnings ratios have compressed by 4%.
The bulk of upward earnings estimate revisions has been concentrated among AI infrastructure companies and energy sector producers. Beyond these industries, earnings forecasts for the remainder of the S&P 500 through 2027 have remained essentially unchanged.
Goldman observed that earnings revision breadth showed improvement across all sectors during the previous month. This development indicates the rally extends beyond merely the largest technology companies.
Capital investment represents a key driver behind rising earnings expectations. S&P 500 companies boosted capital expenditures by 38% year-over-year in the first quarter, dramatically outpacing the modest 1% increase in share repurchase activity.
Goldman projects aggregate capital spending will approach approximately $2 trillion in 2026, with AI hyperscale providers potentially accounting for roughly $755 billion of that total.
Goldman Identifies Lower-Risk Investment Opportunities
Goldman spotlighted consumer staples as the sector demonstrating minimal exposure to AI momentum trading dynamics. Healthcare and real estate sectors similarly exhibited low correlation to the AI trade.
The investment bank compiled a portfolio of stocks exhibiting positive earnings revision trends while maintaining low sensitivity to AI-related trading volatility. This selection included names such as Eli Lilly, Reddit, Newmont, Archer-Daniels-Midland, and Casey’s General Stores.
Goldman also recommended that investors carrying excessive momentum exposure consider incorporating lower-momentum equities as portfolio protection. Historical patterns demonstrate that lagging stocks have typically outperformed during sharp momentum reversals.
The S&P 500’s ten largest constituents currently represent 41% of the index’s aggregate market capitalization and generate 34% of total earnings. Meanwhile, the median S&P 500 component trades 13% beneath its individual 52-week peak.
Goldman has maintained its year-end 2026 S&P 500 price target at 7,600, suggesting constrained appreciation potential from present valuation levels.
