alt Hacker NewsNVidia makes up 7.5% of the SP500. If it lost 50%, it would be a 3% loss for the index. The concentration is bad, but it would not cause a drop of 50% retirement funds by itself. If you take an all world index, it's even less.
Still, if NVidia lost 50% of their market share, we would probably see a big collapse of the stock market.
EDIT: to note, the top ten companies in SP500 make up an unprecedented concentration but they're not "mostly AI".
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A risk in this situation is that in names that are dominated by passive flows there is a pro-cyclical effect where because the name is valued in terms of the overall index but is also part of said index that you end up with a positive feedback loop - which will eventually be arrested by speculators.
> EDIT: to note, the top ten companies in SP500 make up an unprecedented concentration but they're not "mostly AI".
They're mostly either AI proper, or hardware manufacturers benefitting from AI boom, or provide cloud services to AI companies...
An AI collapse would represent a generational buying opportunity for companies like Meta, Google, and MS. It would be bumpy for a bit while things unwind, but eventually all this FCF they have been dumping into AI would start dropping to the bottom line instead. It's like when Meta stopped dumping money in Reality Labs, but on a much larger scale.
Regarding unprecedented concentration, wasn't the nifty fifty era comparable for the top 10, about 40%?
Idunno man. Am I the only one that remembers the day the first DeepSeek model came out?
It wasn't like, "Nvidia took a hit and everyone else was fine". It was more like, "One or two companies were fine, and ALL others took a hit"
how are they not “mostly AI”?
"This tree only makes up 0.0001% of the forest. If it is lit on fire, the forest will be fine"
It is unlikely that a 50% drop in NVidia wouldn't be paired with a significant drop in the valuation of every other company heavily invested in AI.