Market concentration: Building for more than one outcome

Elevated equity-market concentration makes benchmark-aligned portfolios increasingly dependent on a narrow group of AI-linked companies, so investors should diversify their sources of active return rather than try to time a regime reversal.

• SpaceX has already listed, while expected IPOs from Anthropic and OpenAI could add another generation of large AI companies to public benchmarks.
• Information Technology represents roughly half of the Russell 1000 Growth Index, compared with 20% a decade ago, while HHI data show elevated concentration across U.S. and global equities and a particularly sharp increase in emerging markets.
• Historically, rising concentration has often coincided with weaker active-management outcomes, but active results have tended to improve more when concentration declines than they deteriorate when it rises.
• Concentration could persist if large companies continue to deliver stronger earnings, AI capital spending translates into sustainable growth, or further listings, technological breakthroughs and productivity gains support current leaders.
• The June 2026 FTSE Russell reconstitution made Amazon approximately 7% of the Russell 1000 Value Index and moved Apple and Microsoft from exclusively growth benchmarks to roughly equal representation across growth and value indices.
• The AI opportunity extends beyond hyperscalers and chips to electricity generation, grids, cooling, networking, software, automation and data centers, while healthcare, financials, industrials, consumer staples, Europe, Taiwan, Korea and Japan offer less crowded sources of potential returns.

Takeaway: Investors should combine complementary active managers and consider completion strategies, index overlays or factor adjustments so portfolios can participate if mega-cap AI leadership persists while retaining exposure to broader opportunities if concentration plateaus or declines.