Big Tech's Earnings Hold the Key to Stock Market's Future.

The dominance of tech stocks in the S&P 500 has raised concerns among strategists, with the weighting of tech stocks near their highest ever. The obsession with all things AI, particularly large language models and generative AI, has been identified as the culprit for the latest leg up in mega-cap tech. JPMorgan strategists posit that 53% of the S&P 500’s gain this year is due to just six large language model innovators: Microsoft, Alphabet, Amazon, Meta, Nvidia and Salesforce. The current degree of crowding implies the risk of recession is far from priced in, and lower rates from this point on could signal trouble ahead while higher rates are likely to pose a headwind for rich multiples and renew cost of capital pressures.