Economist Steve Hanke highlighted the increasing concentration of semiconductor stocks in the U.S. equity markets, with the sector’s share in the overall stock market capitalization approaching 15%.
Hanke Warns Chip Concentration Looks Dangerous
"This high concentration is not the stuff that makes for a real bull market. BEWARE," Hanke wrote in an X post on Monday, responding to data showing semiconductors now account for roughly 15% of U.S. equity-market value.
The chart Hanke shared shows semiconductor market-cap weight rising from about 4% in 2023 to around 15%, while the industry’s share of market earnings climbed toward 12%. The gap has widened sharply during the artificial-intelligence infrastructure boom, as demand for accelerators, memory and networking chips has lifted companies across the semiconductor supply chain.
Separate Nasdaq Dorsey Wright research illustrates the scale of the shift. Semiconductors rose from 5.05% of the S&P 500 in 2022 to 16.67% by early 2026 and became larger than every broad sector except technology. Semiconductors also represented nearly half of the technology sector.
Hanke has previously taken an even harsher view of AI-linked investing, declaring "WELCOME TO THE AI BUBBLE" while criticizing circular financing around major chip investments.
Market Gains Depend on Fewer Stocks
The concentration extends beyond semiconductors. As of Monday, the S&P 500 has gained about 14% in 2026 even though more than 40% of its constituents are down for the year. Technology alone contributed more than 10 percentage points of the index’s gain, while fewer than half of S&P 500 members traded above their 200-day moving averages. A similarly narrow pattern has appeared in the Nasdaq 100, where more than half of constituents recently traded below their 50-day averages despite record index levels.
Market strategists see concentration as a vulnerability, though not necessarily evidence of a bubble. Miller Tabak strategist Matthew Maley told Reuters in June that if the small group of leading technology stocks rolls over, "by definition, the indexes are going to roll over." Schwab’s Liz Ann Sonders said there is "clearly an overarching AI theme to what is working."
Strong Earnings Complicate the Bubble Debate
Others argue earnings justify much of the rise. Bespoke Investment Group said today’s technology dominance looks "much more sustainable" than the dot-com peak because profits are substantially stronger. Bank of America’s Vivek Arya has similarly argued that the semiconductor rally remains "earnings-led" rather than purely speculative.
Still, Monday’s 2.7% drop in the US benchmark Philadelphia Semiconductor Index, which is tracked by the iShares Semiconductor ETF (NASDAQ:SOXX), showed how quickly sentiment can shift.
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