There are 500 companies in the S&P 500, but only a small percentage have the power to move the index on their own. Among those elite companies are the Magnificent 7—seven stocks that helped drive the S&P 500 to 20%-plus gains in 2023 and 2024.

Thanks to their collective success, the Magnificent 7 stocks comprise over one-third of the S&P 500—prompting many investors to wonder if it’s time to worry about concentration risk. Let’s answer that question by reviewing the key factors, potential diversification strategies and expert commentary about the historically high Mag 7 concentration.

The Magnificent 7 Stocks are:

These seven stocks comprised about 36% of the S&P 500 large-cap index. The remaining 64% of the index was spread across 493 other companies.

The Mag 7 concentration first stretched above 30% in 2023. Only eight years prior, these stocks accounted for 12.4% of the S&P 500. By 2022, the concentration had risen to 21.6%. In those years, the collective market capitalization of the Mag 7 companies rose from $2.2 trillion to $6.9 trillion. Today, their total market cap exceeds $19 trillion.

The growth has been driven by technology innovation and leadership. Nvidia's success in AI has been particularly influential. It encouraged other tech leaders to sharpen their AI focus and positioned AI as a major wealth opportunity for investors.

The S&P 500 weights its constituents using a free-float market capitalization method, which assigns higher weights to larger companies. As a result, larger companies have greater influence over the index than smaller companies.

Free-float market cap is the market value........

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