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Big Tech's hold on the stock market might not last

Data: S&P Dow Jones Indices; Note: 2018 numbers are as of market close on Dec. 7; Chart: Naema Ahmed/Axios

The 4 biggest companies in the S&P 500 are tech companies, and even if you go back to the height of the dot-com bubble in 1999, you won't see this degree of tech dominance in the index.

Why it matters: The companies that have become central to our lives and our politics are now also central to our markets.

Microsoft, Apple, Amazon and Alphabet are the biggest companies in the S&P 500. Add in Facebook (No. 6 on the list, right behind Berkshire Hathaway), and the 5 tech giants — just 1% of the companies in the index — account for 14.7% of its total capitalization.

  • Information technology (like Apple and Microsoft) and communication services (such as Facebook, Twitter and Netflix) are the S&P's tech-heavy sectors, and they make up 40% of the S&P.

Yes, but: Tech dominance waxes and wanes. In 1985, IBM was by far the biggest company in America, responsible for over 6% of the S&P 500 on its own. By 1992, there were no tech companies in the top 10 at all.

  • Today, the S&P is not beholden to single company risk. No single company makes up more than 4% of the S&P — and hasn't since Exxon in 2008.
  • Instead, the "bigness" is spread across a small group of tech companies, nearly all of which face threats of regulation.

The bottom line: The S&P is not particularly concentrated now; the top 10 companies always account for about 20% of the total capitalization. What's new is the degree to which tech companies rule the S&P 500. If history is any guide, that dominance won't last very long.