MARKET OUTLOOK

Reassessing market concentration in the AI era

22 January 2026
Invesco
While there are many eye-catching trends in investing, Invesco QQQ ETF's exposure to innovative companies has been a consistent theme throughout its history

    • The Trust seeks to track the investment results, before fees and expenses, of the Nasdaq-100 Index (“Index”).
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Key takeaways
  • AI-driven growth has helped amplify market concentration, with a small group of mega-cap companies exerting an outsized influence on broad-market performance.
  • Understanding index structure—especially how sector composition and company weights evolve—may be increasingly important in today’s technology-led market environment.
  • QQQ provides exposure to many companies central to AI and digital transformation, although investors may want to consider the portfolio implications of concentrated market leadership.

A handful of mega-cap companies have continued to dominate US equity markets, and their influence has grown even more visible in the past year as artificial intelligence (AI) adoption accelerates.

This concentration has brought renewed attention to how investors understand index structure, sector composition, and the potential for large companies to shape broad-market performance. While concentration is not new, the forces driving it today—AI infrastructure investment, cloud computing expansion, and digital transformation—give the topic fresh relevance.

Understanding today’s concentration environment

Market concentration often rises during periods when a small number of companies generate outsized earnings growth or become central to emerging technologies.

For example, the top 10 largest US stocks by market capitalization represent about 35% of the overall market, compared with 18% a decade ago.1

Percentage share of top 10 stocks in the US market

“2026 Global Outlook Report,” Morningstar, data as of September 30, 2025.

Over the past year, advancements in generative AI, including chatbots like ChatGPT, and large-scale data processing have intensified this trend. Companies positioned at the core of AI hardware, cloud services, and software ecosystems have seen elevated demand for their capabilities, contributing to rising stock prices, larger index weights, and heightened investor focus.

Several structural factors may also be contributing:

  • AI catalysts: Demand for computing power, semiconductors, and cloud infrastructure has expanded quickly, and companies central to these areas may disproportionately capture that growth.
  • Macro and policy uncertainty: As interest rates and inflation fluctuate, investors sometimes favor firms with strong balance sheets and diversified revenue streams. These attributes tend to be common among the largest index constituents.
  • Investor behavior and overlap: Enhanced visibility of AI-related themes, combined with flows into index-based strategies, may increase overlap among broad-market allocations, further reinforcing concentration.

While concentration can raise questions about diversification and volatility, it may also reflect long-term structural shifts toward technology-enabled business models.

How QQQ relates to the conversation

Invesco QQQ ETF tracks the Nasdaq-100® Index, which includes 100 of the largest non-financial companies listed on the Nasdaq Stock Market. These companies span sectors such as Information Technology, Communication Services, and Consumer Discretionary, areas that often feature prominently in the ongoing adoption of digital and AI-enabled technologies.2

Because of its methodology, the Nasdaq-100 has often exhibited higher exposure to firms developing or enabling innovation. Examples within the index have included companies contributing to semiconductor design, cloud architecture, entertainment technologies, e-commerce platforms, and cybersecurity solutions. These examples are illustrative and not exhaustive, and the index’s composition will evolve over time.

For investors, this means that QQQ may offer access to companies at the forefront of technological change, while also carrying the structural reality that a relatively small number of large firms may influence index results.

Indeed, the “Magnificent Seven” stocks—Apple, Microsoft, Amazon.com, Alphabet, Tesla, Nvidia, and Meta—are currently held in QQQ.3 That’s one reason why QQQ has generated respectable returns over the past five years, delivering an annualized return of 22.08% over the period, outperforming the 13.59% annualized return of the Russell 3000® Index, a benchmark considered representative of the U.S. stock market.4

Standardized performance - Performance quoted is past performance and cannot guarantee of comparable future results; current performance may be higher or lower. Visit invesco.com/performance for the most recent month-end performance. Investment returns and principal value will vary; you may have a gain or loss when you sell shares. Fund performance reflects fee waivers, absent which, performance data quoted would have been lower. Invesco QQQ’s total expense ratio is 0.18%. Index performance does not represent fund performance. Please keep in mind that high, double-digit and/or triple-digit returns are highly unusual and cannot be sustained.

Risk and considerations in a concentrated market

Periods of elevated concentration may cause investors and financial professionals to reassess if portfolios still line up with long-term objectives.

Relevant considerations include:

  • Portfolio balance: In a growth-oriented portfolio, QQQ might be used to help complement other allocations, such as value, small-cap, international equities, or fixed income. These combinations may help balance concentrated exposure within a broader framework, although diversification does not eliminate the risk of loss.
  • Rebalancing discipline: As relative performance shifts, periodic portfolio reviews may help maintain alignment between allocation targets and investor goals.
  • Correlation awareness: When several indexes and active strategies exhibit overlapping large-cap technology exposure, correlations may rise, influencing portfolio-level risk characteristics.
  • Macro sensitivity: Concentrated large-cap companies may react differently to changes in earnings trends, regulation, or economic conditions than smaller companies.

These considerations do not imply a view on the market’s direction; rather, they help frame concentration as a factor to keep an eye on.

Why concentration may remain a topic of interest

Technology-driven shifts—especially AI adoption—continue to influence corporate investment and sector leadership. Whether markets remain concentrated or eventually broaden, this evolution underscores the importance of understanding how indexes like the Nasdaq-100 are constructed, and their potential impact on investments like Invesco QQQ ETF.

  • 1

    “2026 Global Outlook Report,” Morningstar, data as of September 30, 2025.
  • 2

    The Index and Fund use the Industry Classification Benchmark (“ICB”) classification system which is composed of 11 economic industries: basic materials, consumer discretionary, consumer staples, energy, financials, health care, industrials, real estate, technology, telecommunications and utilities.
  • 3

    Invesco QQQ holdings as of September 30, 2025. Fund holdings are subject to change and are not buy/sell recommendations.
  • 4

    Performance is shown at NAV. Source: Invesco, as of November 29, 2020-November 30, 2025. 

  • This does not constitute a recommendation of any investment strategy or product for a particular investor.

    The opinions expressed are those of the author, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.

    Growth stocks tend to be more sensitive to changes in their earnings and can be more volatile.

    Russell 3000® Index includes those Russell 3000® companies with higher price-to-book ratios and higher forecasted growth values.

    The price-to-book ratio considers how a stock is priced relative to the book value of its assets.

    The Nasdaq-100® Index is a stock market index made up of equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock exchange.

    Diversification does not guarantee a profit or eliminate the risk of loss.

    Holdings are subject to change and are not buy/sell recommendations. As of 11/29/2025, NVIDIA Corp, Apple Inc, Microsoft Corp, Amazon.com Inc, Meta Platforms Inc, Tesla Inc, Alphabet Inc, PepsiCo Inc, Adobe Inc, and Intel Corp make up 9.41%, 8.61%, 7.67%, 5.09%, 2.98%, 3.40%, 3.86%, 1.03%, 0.75%, and 0.91% of Invesco QQQ ETF, respectively.

    Investment involves risks. The value of investments, and any income from them, will fluctuate. This may partly be the result of changes in exchange rates. Investors may not get back the full amount invested. Past performance is not indicative of future performance.

    There are risks involved with investing in Exchange-traded Funds (“ETFs”), including possible loss of money. Index-based ETFs are not actively managed, and the return of index-based ETFs may not match the return of the Underlying index. Actively managed ETFs do not necessarily seek to replicate the performance of a specific index. Both index-based and actively managed ETFs are subject to risks similar to those of stocks, including those related to short selling and margin maintenance requirements. Ordinary brokerage commissions apply. Equity risk is the risk that the value of equity securities, including common stocks, may fail due to both changes in general economic and political conditions that impact the market as a whole, as well as factors that directly related to a specific company or its industry.

    Investments focused in a particular sector, such as technology, are subject to greater risk, and are more greatly impacted by market volatility, than more diversified investments.

    The Nasdaq-100® Index comprises the 100 largest non-financial companies traded on the Nasdaq. An investor cannot invest directly in an index.

    The sponsor and adviser of the Invesco QQQ TrustSM, a trust, is Invesco Capital Management LLC. NASDAQ, Nasdaq-100 Index, Nasdaq-100 Index Tracking Stock and QQQ are trade/service marks of The Nasdaq Stock Market, Inc. and have been licensed for use by Invesco, QQQ's sponsor. NASDAQ makes no representation regarding the advisability of investing in QQQ and makes no warranty and bears no liability with respect to QQQ, the Nasdaq-100 Index, its use or any data included therein.

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