Until recently, several of the world’s largest companies were largely self-funding much of their growth initiatives using free cash flow generated from strong earnings growth and margin expansion. This conservative approach to the development of innovation was rewarded by investors seeking high-quality growth companies. Between January 2023 through October 2025, the S&P 500 Top 10 Index, comprised of market-cap weighting of just the 10 largest companies, nearly doubled the returns of the S&P 500 Index (46.1% vs. 24.3%). And as a result, the 10 largest US companies now represent approximately 42% of the entire S&P 500 Index.1
Shifting dynamics: Overstretched valuations?
However, recent dynamics have begun shifting. Growing enthusiasm for AI has catapulted many of these companies into a spending frenzy, with capital expenditures soaring to fuel the data centers and computing power needed for AI innovation. Such high spending needs have begun necessitating a shift from the previous internally funded investment approach to external financing instead. This surge in leveraged spending comes at a time when market leadership is increasingly concentrated among a few dominant firms, and with the S&P 500’s forward P/E ratio at 22.5 as of the end of October1 — its highest since the post-pandemic peak and close to dot-com-era levels — the risk of overstretched valuations looms large.
RWL, Invesco S&P 500 Revenue ETF
One potential solution for nervous investors is an alternatively weighted strategy that ties a company’s weight to a fundamental metric like revenue. RWL, the Invesco S&P 500 Revenue ETF, invests in all 500 stocks in the S&P 500, but, instead of assigning weights based on market cap, it weights holdings based on their proportional revenue contribution, subject to a 5% single stock cap at each rebalance. Revenue weighting can be a simple, effective tool to get broad market exposure at lower valuations and with less concentration. For example, the forward price-to-earnings ratio of RWL at the end of October was 16.3 (vs. 22.5 for the S&P 500 Index), and the top 10 companies accounted for 24.2% of RWL (versus 41.6% for the S&P 500 Index).1 At the same time, a broadening economic backdrop could create opportunities beyond the mega-cap names dominating today’s headlines, and RWL may provide a more balanced way to participate in that growth.
