S&P 500 Briefly Tops 7,000 as Big Tech and AI Tighten Grip on U.S. Stocks

The S&P 500 stock index briefly traded above 7,000 points for the first time Wednesday, a landmark moment in U.S. markets that underscored how a small cluster of giant technology and artificial intelligence companies now dominates Wall Street’s main barometer of corporate America.

The benchmark index, which tracks 500 large U.S. companies and is widely used as a shorthand for “the market,” climbed to just over 7,001 shortly after the opening bell in New York. It later slipped back below the round-number threshold and was last seen hovering just under 7,000 in afternoon trading, still up about 0.3% on the day and set for a sixth straight gain.

The move capped a rapid advance from 6,000 points just 15 months ago and came on a day when investors were also parsing a Federal Reserve policy decision and gearing up for earnings from some of the world’s most valuable technology companies.

A milestone—and a concentrated market

While traders cheered the psychological milestone, the details behind it highlight a market that has grown both richer and narrower. Technology-related companies now account for nearly half the S&P 500’s total weight, and the 10 largest constituents — led by Nvidia, Alphabet, Apple, Microsoft and Amazon — together represent roughly 40% of the index’s value, an unusually high concentration by historical standards.

“AI and Big Tech are doing the heavy lifting,” said one U.S. equity strategist at a large investment bank. “The broader economy is OK but not booming. This is really a story about a handful of mega‑caps.”

Intel and Texas Instruments were among the day’s standout gainers as the S&P 500 crossed 7,000, jumping more than 8% in morning trading on optimism about demand for chips used in data centers and artificial intelligence applications. Shares of Nvidia, the semiconductor company that has become the emblem of the AI boom, also advanced, along with Tesla and software maker Adobe.

The tech-heavy Nasdaq Composite rose about 0.6% in early dealings. The Dow Jones Industrial Average, which tracks 30 blue-chip stocks, traded above 49,000, edging closer to the 50,000 mark less than two years after first clearing 40,000.

Fed holds rates steady

The S&P 500’s latest record followed a choppy start to the year marked by sell-offs linked to tariff policy uncertainty, tensions between the United States and NATO allies over Greenland, and questions about the Federal Reserve’s independence. The index has since rebounded to fresh highs as concerns eased and investors refocused on falling interest rate expectations and the potential profits from AI.

Policymakers at the Fed on Wednesday left their benchmark federal funds rate unchanged, following three cuts in 2025. In its statement, the Federal Open Market Committee said it “seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run,” and repeated that future adjustments to rates would depend on incoming data on inflation, employment and economic activity.

Chair Jerome Powell told reporters the central bank was “proceeding carefully” after the earlier reductions, language investors interpreted as cautious but not overtly hawkish. Stocks trimmed gains after his remarks, suggesting some disappointment among traders who had hoped for a clearer signal on the timing of additional cuts.

Even with the Fed on hold, financial conditions remain relatively loose and borrowing costs well below their 2023 peaks. Futures markets still point to at least two quarter-point rate cuts this year, a backdrop that has helped support lofty equity valuations.

Valuations rise as gains narrow

By one common measure, the S&P 500 now trades at about 22 times analysts’ estimates of companies’ earnings over the next year, above its average multiple over the past decade and at a premium to most other major markets. A separate yardstick of past profits puts the index’s price-earnings ratio near the upper end of its range since the financial crisis.

Those numbers have fueled debate over whether the AI wave justifies paying more for U.S. stocks, or whether investors are bidding up a narrow group of winners and leaving themselves vulnerable to a sharp reversal if expectations are not met.

Corporate earnings data show how much the market’s gains have depended on technology and communication services companies. Since 2000, aggregate earnings per share for the S&P 500 have surged more than 300%, but research from large banks indicates that the “average” U.S. company has seen profits grow far more modestly. At the same time, many indicators of the real economy — including wage growth, consumer spending and parts of the job market — have softened over the past year.

“The stock market and the economy are looking increasingly out of sync,” said an economist at a New York research firm. “Household balance sheets with a lot of equities have done very well. Households living paycheck to paycheck have not.”

How fast the index has climbed

The path to 7,000 has been notably faster than earlier climbs between big round numbers. The S&P 500 first closed above 1,000 in 1998, then took 16 years to reach 2,000 in 2014. It crossed 3,000 in 2019, 4,000 in April 2021, and 5,000 in February 2024. The move from 5,000 to 6,000 took about nine months, while the jump from 6,000 to Wednesday’s brief foray above 7,000 came in just over a year.

The comparison many investors reach for is the late 1990s technology boom, when a surge in internet-related stocks pushed major indices to record highs before the dot-com bubble burst. There are important differences: today’s largest companies generate substantial profits and cash flows, and many are deeply embedded in the global economy through cloud computing, advertising, hardware and e‑commerce.

Yet the concentration of gains in a small group of companies is similar. Estimates from market data providers suggest the top five S&P 500 names now account for close to 30% of the index, a larger share than at the height of the dot‑com era.

What it means for retirement savers and regulators

That structure has implications far beyond Wall Street trading floors. Trillions of dollars in retirement savings are tied to funds that track the S&P 500, meaning millions of Americans’ 401(k) and individual retirement accounts now hinge in part on the fortunes of a few technology giants and the future of AI spending.

For those who own little or no stock, the benefits of record index levels are less visible. Surveys in recent years have found that a significant share of U.S. households do not participate in the stock market at all, and those that do often hold modest balances. Rising share prices can help companies raise capital and invest, but they can also widen wealth gaps if most of the gains accrue to existing investors and corporate insiders.

The AI boom itself carries uncertainties. Companies globally are pouring hundreds of billions of dollars into data centers, specialized chips and software to power new applications, from chatbots and coding assistants to industrial automation. Supporters argue that those investments will deliver productivity gains that filter through to wages and living standards over time. Skeptics warn that the spending could overshoot, leading to overcapacity and pressure on profits if demand fails to keep up.

Regulators are watching closely as well. Antitrust authorities in the United States and Europe have opened or expanded investigations into the competitive practices of several major technology firms. Lawmakers are also considering new rules on the use of artificial intelligence, data privacy and online platforms, any of which could affect the earnings outlook for the companies that now dominate the S&P 500.

Looking ahead

For now, the market’s verdict remains upbeat. The S&P 500’s latest milestone underlines investors’ willingness to look past political tensions, tariff threats and an uneven economic backdrop in favor of the promise of AI and the earnings power of a few massive corporations.

Whether 7,000 proves to be a stepping stone to even higher levels or a high-water mark for this phase of the bull market will depend on how those expectations collide with reality — in company earnings reports, in central bank meeting rooms and in an economy that has yet to fully reflect the revolution investors believe is under way.