The S&P 500 Index, made up of the 500 largest publicly traded companies in the U.S., used to represent the backbone of America’s economy. Nowadays, the largest seven stocks — Nvidia, Apple, Microsoft, Amazon, Alphabet (Google), Broadcom and Meta (Facebook) — represent roughly a third of the entire index. What once felt like a bet on the United States is now a bet on AI, big tech and the continued dominance of a handful of giants.

This isn’t a mistake; it’s how the index has been designed since its inception in 1957. Each company is weighted based on its valuation, giving larger companies more influence over the index’s daily moves.

As a result, one bad earnings report from Nvidia can negatively impact “the market” as a whole, as opposed to a singular sector. And that influence is hard to overstate. If these seven companies were their own stock market, they’d be the second largest in the world, behind only the United States itself.

This leaves investors from all backgrounds, preferences and investment goals overexposed to the volatility of AI, and at the mercy of data center expansion.

However, this exposure extends far beyond individual investors. Pension funds, retirement accounts and institutional investors are all susceptible to the same risk, whether they realize it or not.

Michael Kantrowitz, chief investment strategist at Piper Sandler, a U.S. investment-banking firm, recently put it, “You think you’re buying an index, but you’re really just exposed to seven or 10 stocks. If the AI story takes a dip, it doesn’t necessarily hit all stocks, but it could really hit those index funds.”

It’s clear that investors of all magnitudes need to reevaluate their portfolios to mitigate this growing concentration risk.