Can you have too much of a good thing? AI stocks have been exciting to own and the returns have been phenomenal. But you may have a lot more riding on the same handful of AI giants than you realize, even if you think you own hundreds of different stocks. I call it “AI Creep.” Here’s one way to spread that risk without giving up the S&P 500.
I’ve already written on one of the biggest misconceptions about S&P 500 index funds, which is that you can own 500 stocks and still not be as diversified as you think. Today just 10 big companies represent almost 40% of the traditional S&P 500.
This happens because your S&P 500 index fund is probably market-cap weighted, which means the bigger a company gets, the more of it you automatically own. So as the giant AI stocks have soared in value, they’ve become a bigger and bigger share of your fund, whether you want to make a bigger bet on AI or not.
I’m talking about all the big AI players like Nvidia, Microsoft, Alphabet, Amazon and Meta that have propelled to enormous valuations, and that’s been great for investors who own them. But you may look at those companies and think you own several very different businesses, not realizing a lot of their growth is increasingly tied to the same underlying story: massive spending on AI, data centers, chips and computing power, and a ton of borrowing to make these ginormous AI bets pay off.
If all that investment does keep paying off, it’s fantastic. But if expectations get ahead of reality, several of your biggest holdings could get hit at the same time.
None of this means you should dump your S&P 500 fund. These companies became such a huge part of the index because their values soared, and if they can keep outperforming, having more money in them can keep working in your favor. The problem isn’t concentration by itself. But if you don’t know what your holdings are, well . . .
Start by looking under the hood. Look at your S&P 500 fund, your growth funds and your tech funds and see how much overlap you actually have. Then, if you decide you’re not diversified, consider another approach.
There’s another way to own the S&P 500
It’s called equal weight.
Instead of letting the biggest companies take up more and more of the index, an equal-weight fund gives every company roughly the same weight, about 0.2% when the fund rebalances. You still own Nvidia, Microsoft, Apple, Amazon and the rest of the giants. You just own a lot less of them and a lot more of the other companies in the index.
The Invesco S&P 500 Equal Weight ETF, ticker RSP, just crossed $100 billion in assets, 23 years after it launched. That doesn’t mean investors have discovered a “better” S&P 500, because there is no better version for everyone. But $100 billion is a pretty good indication that investors are paying attention to concentration risk.
So far in 2026, the equal-weight S&P 500 was up about 16.1% versus 13.5% for the traditional cap-weighted S&P 500. In other words, recently the rest of the S&P 500 has actually been outperforming the version dominated by those mega-cap giants.
Again, I’m not saying sell your existing index funds just because you’ve discovered AI creep in your portfolio. But do consider directing any new investment money differently.
What do you gain, and what do you give up?
The obvious benefit of equal weight is less concentration. Instead of having close to 40% of your S&P 500 money riding on 10 companies, your money is spread much more evenly across all 500. The other 490 stocks suddenly have a much bigger opportunity to affect your returns.
There’s also a built-in discipline to equal weighting. The funds periodically rebalance, trimming stocks that have gotten bigger and adding to stocks that have gotten smaller. That sounds pretty appealing, but remember what it also means, that you’re deliberately trimming your winners.
If Nvidia, Microsoft and the other mega-cap companies keep outperforming, the traditional S&P 500 could continue to beat equal weight. A cap-weighted index lets its winners run and become bigger and bigger pieces of the portfolio. Equal weight keeps cutting those winners back down to size every time it rebalances.
Equal weight also gives you more exposure to the smaller companies within the S&P 500, and equal-weight funds generally cost more than the rock-bottom fees available on traditional S&P 500 index funds.
You don’t have to choose
This is the part I think investors sometimes miss. You don’t have to pick one version of the S&P 500 and declare it the winner. You can own some of each.
If you’ve built up a big position in a traditional S&P 500 fund and you’re uncomfortable with how concentrated it has become, adding some equal-weight exposure is one way to dial that concentration back without walking away from the S&P 500. But before you do that, look at your whole portfolio, because you may already own mid-cap, small-cap or international funds that give you plenty of diversification away from those giant U.S. companies.
Or you may discover exactly the opposite. You own an S&P 500 fund, a growth ETF and a technology ETF, and all three are loading you up on many of the same stocks. That’s why counting the number of funds you own is not the same thing as being diversified.
So don’t change your portfolio just because somebody tells you the S&P 500 is too concentrated. First figure out how concentrated you are, including how much AI creep has worked its way into funds you already own. Then decide whether you’re comfortable with it. If you’re not, equal weight is one way to do something about it.
P.S. Financial plans work best when they’re tailored to you. Connect with Wealthramp’s network of vetted, fiduciary advisors anytime.