The S&P500 (SNPINDEX: ^GSPC) is composed of 500 stocks from 11 different sectors, including information technology, energy, financial services and real estate. Although it is the most diversified of the major US stock market indexes, a select number of technology stocks are increasingly having an impact on their performance due to their rapid appreciation.
At the time of writing, the following five companies have a combined market cap of $12.5 trillion, accounting for 27.3% of the total value of the entire S&P 500:
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Microsoft (NASDAQ: MSFT) has a market capitalization of $3.2 trillion.
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Apple (NASDAQ: AAPL) has a market capitalization of $2.9 trillion.
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Nvidia (NASDAQ: NVDA) has a market capitalization of $2.8 trillion.
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Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) has a market capitalization of $2.2 trillion.
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Amazon (NASDAQ: AMZN) has a market capitalization of $1.9 trillion.
The S&P 500 index is up 11.5% so far in 2024. However, the S&P 500 Equal Weight Index – which gives an equal weight to each stock regardless of its market capitalization – is up just 4.9%. The difference can be (largely) explained by the average year-to-date gain of 26.3% in the above five stocks, highlighting their influence on the S&P 500’s performance.
Each of the five companies has a track record of success spanning decades, and they’re using that experience (and their vast financial resources) to dominate new industries like artificial intelligence (AI). If they succeed, they could become even more influential on the S&P 500.
1. Microsoft: 7.2% of the S&P 500
Microsoft is the largest company in the world. It was founded in 1975 and some of its flagship products, such as Windows and Word, are still used by billions of people. Microsoft has gone beyond just software and expanded into gaming, hardware (computers and devices), web search, cloud computing and now AI.
In early 2023, the company agreed to invest $10 billion in AI startup OpenAI, which created the online chatbot ChatGPT. Microsoft is integrating OpenAI technology into most of its products to deliver more value to users. For example, the Bing search engine now features a chatbot interface, and applications like Word, PowerPoint and Excel benefit from AI’s ability to quickly edit content from text to videos.
Microsoft has cemented itself as a leader in AI thanks to the OpenAI partnership, and its products will continue to benefit from the startup’s rapid innovation.
2. Apple: 6.2% of the S&P 500
Apple makes some of the most popular consumer electronics in the world, with 2.2 billion active devices worldwide. That includes the flagship iPhone, the iPad and the Mac line of computers. The iPhone also spawned successful billion-dollar spin-off devices like the Watch and AirPods wireless headphones.
Apple’s massive installed base makes it the perfect distributor of AI software for consumers. The latest iPhone 15 Pro already comes with Apple’s A17 Pro chip, designed to handle certain AI workloads on the device. The company is reportedly in talks with OpenAI and Alphabet to decide which AI models will power its future devices, so consumers can expect the next iteration of chips to come with even greater processing capabilities.
Ultimately, devices like the iPhone could come with advanced AI assistants that can answer complex questions and create emails and social media content, among other things. Modern smartphones are simply pocket-sized computers, and overall, they have made humanity much more productive. AI will accelerate this trend.
3. Nvidia: 5.9% of the S&P 500
Generative AI is developed, trained and deployed in large, centralized data centers. Nvidia designs the graphics processing chips (GPUs) that fill these data centers, and they are the most sought after in the industry among AI developers. During fiscal year 2024 (ending January 28), Nvidia’s H100 GPU boosted the company’s data center revenue to $47.5 billion, up a whopping 217% year over year.
The company just reported its financial results for the first quarter of fiscal 2025 (ending April 28) and data center revenue growth accelerated up to 427%. Sales of the H100 increased, but shipments of the new H200 GPU will begin in the second quarter. It can draw conclusions (the process of feeding live data into an AI model so it can make predictions) twice as fast as the H100, while using half the amount of energy, which could create a new wave of demand leading data center operators such as Microsoft, Amazon, and Googling.
Essentially, Nvidia remains far ahead of its competitors, and the development of the next generation of AI models will not be possible without its GPUs. The company plans to launch a new series of chips built on the latest Blackwell architecture later this year that will deliver even better performance.
4. Alphabet: 4.3% of the S&P 500
Alphabet is the parent company of Google, and it is also home to other tech subsidiaries such as YouTube, autonomous driving company Waymo, and AI developer DeepMind. Google Search remains Alphabet’s biggest revenue generator, but investors are wondering whether AI chatbots can challenge its dominance given their ability to provide an instant answer to almost any question.
Data is king when it comes to AI, and since Google Search has been the window to the entire Internet for more than two decades, it has more valuable information than virtually any company in the world. This allowed Alphabet to develop its own AI models, culminating in the latest Gemini series, which is designed to compete with OpenAI’s GPT-4 models. In some tests, Gemini is just as good, if not better, at understanding and generating text, images, videos, and computer code.
Google has also embedded generative AI into its traditional search engine, which provides the user with a text-based answer at the top of the page, so they don’t have to scroll through web results to find the information they need. Alphabet’s AI initiatives are resonating with investors, who catapulted the company into the exclusive $2 trillion club this year.
5. Amazon: 3.7% of the S&P 500
Amazon is mainly known as an e-commerce company and online sales remain its largest source of income. But the company has also expanded into streaming, digital advertising, robotics, and cloud computing (among others), all of which contributed to the company’s position on this list. In fact, the cloud platform Amazon Web Services (AWS) is the largest in the industry and hosts a growing number of AI services.
Amazon CEO Andy Jassy wants AWS to dominate the three layers of AI. There is the infrastructure layer, the model layer and the application layer. To achieve this, the company is now designing its own AI chips for the data center, offering a growing portfolio of off-the-shelf large language models (LLMs), including some it has developed in-house, and recently launched a generative Launched AI assistant called Q to help companies get more value from the AWS platform.
Amazon also uses AI in its core e-commerce platform to recommend products to customers and help advertisers create engaging content. Simply put, this is one of the most diversified companies an investor can own during the AI revolution.
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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
These five artificial intelligence (AI) stocks make up 27.3% of the entire S&P 500 index, originally published by The Motley Fool
