Nvidia, Apple 'Too Big, Too Soon'? Relax - This Same Thing Happened In The 1930s

By Erica Kollmann | March 10, 2026, 2:18 PM

The Research

Elm Wealth CEO James White and CIO Victor Haghani on Monday highlighted research spanning nearly a century of U.S. market data. Today’s concentration levels, they argue, are well within historical norms.

“We think the concern about concentration is misplaced,” they wrote.

Mark Kritzman, an MIT lecturer, and David Turkington, head of State Street Associates, present a similar case. In a 2025 paper titled “The Fallacy of Concentration,” they show that the number of S&P 500 stocks has indeed fallen to near its lowest point since 1998. But they maintain that “the U.S. stock market has not become riskier as it has become more concentrated.”

Extend the analysis further back, and a different picture emerges — the market was at least as concentrated in the 1930s, 1950s, and 1960s as it is today.

A separate 2026 study titled “Magnificent, but Not Extraordinary” pinpoints the peak. In May 1932, seven companies —including AT&T (NYSE:T), Standard Oil and General Motors (NYSE:GM) — controlled roughly one-third of total U.S. market value. That’s almost exactly what the Magnificent Seven control right now.

What This Means For Investors

Acting on concentration fears, the bulls say, is less a defensive move than a performance-destroying one.

When researchers modeled a dynamic trading strategy that reduces equity exposure as concentration rises, the results were damning: lower returns, higher volatility, and a Sharpe ratio less than half that of a simple buy-and-hold approach.

The buy-and-hold strategy, as Elm Wealth’s Haghani and White put it, “generated more than twice as much wealth as the dynamic strategy during this period, and it did so with less risk.”

Concentration, their data shows, has essentially no relationship with subsequent market risk or return.

“Investors who react to concentration by reducing equity exposure or deviating from market weights are, on the evidence, more likely to hurt themselves than help themselves,” write Haghani and White. “The best response to concentration is no response at all.”

What is driving today’s concentration is also worth understanding, because it deflates another popular theory — that passive index investing has artificially inflated the biggest stocks.

The historical record kills that argument: the market was just as concentrated in the 1930s, decades before the first index fund existed.

Concentration, it turns out, is simply what normal markets do over time. When firms grow at different rates, idiosyncratic risk compounds across decades, and a few winners naturally pull away from the pack. No bubble required, no behavioral bias needed, no index fund conspiracy necessary.

What About Earnings And Valuations?

Not everyone agrees that concentration is harmless.

The International Monetary Fund (IMF), for example, warned in October that the dominance of a small group of technology giants could leave markets vulnerable to a sharp correction if their earnings disappoint. Because those companies, all in one sector, now account for such a large share of the index.

A pullback could ripple through retirement portfolios and broader financial conditions, according to the IMF.

Torsten Sløk, the chief economist at Apollo Global Management, has also cautioned that the S&P 500 has become "extremely concentrated." Investors who buy the benchmark are increasingly making a large bet on a small cluster of mega-cap firms. In that view, the concern isn't just valuation—it's that the market's diversification may be weaker than it appears.

The share of aggregate revenue, earnings and cash flow controlled by the largest firms has fallen in lockstep with their rising market weight. The Magnificent Seven are expensive, trading at around 35 times last year’s earnings, but so is the broader S&P 500 technology sector.

Mid-cap tech, often cited as the safer alternative, trades at 45 times earnings — higher than the giants investors are supposedly fleeing toward.

None of this means that U.S. stocks are a screaming buy. Haghani and White are careful to separate the concentration question from the valuation question, and on valuation, they are more cautious.

Their estimate puts the long-term expected return of U.S. equities at only about 1% above inflation-protected bonds — a thin margin that puts the burden squarely on stock selection and disciplined asset allocation, not on reshuffling deck chairs around the Magnificent Seven.

Photo: boscorelli / Shutterstock

This article Nvidia, Apple 'Too Big, Too Soon'? Relax — This Same Thing Happened In The 1930s originally appeared on Benzinga.com

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