Once again, markets are at all-time highs. I’ve written about this before, where the data shows all times high are usually followed by more all times highs.
Of course, I am talking about US markets.

In this past decade, we’ve only seen growth from a small group of technology companies based in the US. If we removed this small group, returns in the US market have been in line with the rest of the world.
The chart below illustrates the dominance of the Magnificent 7 over the past year. These tech companies are Microsoft, Apple, Meta (Facebook), Alphabet (Google), Nvidia, Tesla, and Amazon.
Chart: Returns on the S&P 500 with and without the Magnificent 7

If we dive further into the Magnificent 7, we see Nvidia has been the driving force of returns from last year.

The stock is up almost 2000% over the past 5 years, and almost 350% since 2023 alone.
This seems almost absurd. Nvidia produces the chips used in Artificial Intelligence (AI), and all the other Magnificent 6 are buying their chips.
Just the other day, Mark Zuckerberg put in an order for 350,000 chips from Nvidia. At normal costing, that’s a $10 billion order. Nvidia’s recent results show that 40% of their revenue comes from the other Magnificent 6. And we know they aren’t strapped for cash.
The next question is – are we in a bubble? Are these companies overpriced? How long can this go on for?
Well, that’s a tough one to answer. On the one hand, we had seasoned investors calling a top to the tech stocks as far back as 2015. That was a disaster.
What no one anticipated with these tech stocks was their ability to sustain very high levels of growth. One of the major differences with these industries today versus the older world companies is that it’s incredibly easy for them to scale.
For old world companies (banks, manufacturers, retailers, oil and energy companies), scaling meant building more factories, hiring more office space, and hiring more staff (very tangible and quantifiable). New world companies, on the other hand, scale by building more data centres (less tangible and less quantifiable).
The assets of new world companies are the code that their platforms are built on, the software engineers that build systems that support hundreds of millions of individuals, the intellectual property of their algorithms. These things are difficult to quantify.
In the past 5 years, Nvidia’s stock is up 1700%. Guess what else is up 1700% over that period? Nvidia’s earnings estimates.
Over the past 14 years, Amazon is up 2800%. Their earnings over the same period are up 2500%. In 2002, Microsoft’s earnings were $0.93 per share. Today they are $11.57. That’s an approximately 1250% increase. Their share price? Up 1200%. Finally, Google is up about 980% over the past 14 years. Their earnings were up 885% in the same period.
Make sense? I think it does.
How long these tech companies continue to sustain these high growth levels, no one knows. But while their growth rates remain high, I don’t think they are overly expensive.
I’d keep a healthy exposure to these companies, but also with the knowledge that it can’t go on forever. Rather than trying to predict when this will be, a better answer is to have a portfolio that can absorb this kind of shock (when the growth slows down).
A structural fault in a house will only become apparent in an earthquake. It’s the same with your portfolio – it will become apparent in the next market crash. If this is something you are concerned about, feel free to contact me. I’d be happy to help.