The S&P 500 has gained 117% since its closing low on October 12, 2022, making this the eighth-longest bull run since World War Two and the sixth-best-performing over the same historical span. On October 9, 2026, just three days before the low’s fourth anniversary, the index traded near record highs. What began as a recovery from broad market pessimism has become far more concentrated—and potentially fragile.
AI investment has driven the rally. ChatGPT launched about a month after the bull market began, and the technology sector hasn’t looked back. S&P 500 earnings are expected to rise more than 35% this year, boosted by hyperscalers’ capital spending to build data centers supporting artificial intelligence infrastructure. Oxford Economics estimates that about one-third of recent U.S. economic growth stems from AI, including direct investment in AI infrastructure and stock-market appreciation that lifts consumer spending.
“You’re seeing that AI theme show up in the economy and in corporate profits,” said Anthony Saglimbene, chief market strategist at Ameriprise. Yet beneath this success sits a troubling structural shift in the market itself.
The Concentration Problem
Only technology and communication services have outpaced the index among the 11 S&P 500 sectors during the bull run. Both include megacap AI companies Alphabet and Meta Platforms. Nvidia’s market capitalization has climbed to $5.8 trillion from $286 billion on October 12, 2022, making it the world’s largest company by market value. Thirteen U.S. companies now have market values of at least $1 trillion; all but two are in technology or have significant AI exposure.
That concentration brings strength and risk. J.P. Morgan Asset Management says the 10 largest companies now make up about 40% of the S&P 500, up from about 28% in October 2022. “It is a reflection of fundamental strength and earnings outperformance, but also it introduces some risks,” said Angelo Kourkafas, senior global investment strategist at Edward Jones. “The risk of concentration is that if the prevailing theme goes out of favor, portfolios might feel it in an outsized way.”
Market strategists increasingly worry about what comes next. “The AI theme is the defining feature of this bull market,” Saglimbene said. “What you’re seeing in terms of the bull market four years in is, I think, the easy money around AI has been made. As we get further into this bull market, there is just going to be more pressure on especially technology companies to prove that the spending that they’re doing today is actually going to translate into the profits.”
Rising Rate Headwinds
The Federal Reserve’s recent pivot to rate hikes, aimed at bringing down high inflation, poses a direct headwind. The benchmark 10-year Treasury yield stood around 5.2% after recently reaching its highest level in 24 years. Higher yields compete directly for equity investors and sap momentum from growth stocks. Markets remember the pattern: the bear market before the October 2022 low coincided with a sharp rate-hiking cycle.
Edward Jones has started adjusting its strategy. Kourkafas said the firm remains overweight equities, but its recommendation is less aggressive than before as fixed income grows more attractive. “We still think that the bull market is not about to end, but it makes sense to us to take some of the risk off the table,” he noted. Mark Hackett, chief market strategist for Nationwide, offered perspective: “Four years is not, by any stretch of the imagination, scary with regards to a bull market. They don’t end of old age; they end from disease.”
Third Quarter Earnings Reality
Analysts expect S&P 500 earnings to rise about 31% year over year in the third quarter, with technology and AI-heavyweights Alphabet, Amazon.com and Meta Platforms accounting for two-thirds of the increase, according to Tajinder Dhillon, LSEG’s head of earnings and equity research. Technology stocks helped the S&P 500 hit a record high during the week before earnings season, which was expected to unofficially begin with results from banks including JPMorgan Chase and Goldman Sachs.
“It’s all AI and, to a lesser extent, energy and materials, but that’s because of geopolitics,” said Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute. “It wouldn’t surprise me if 70-80% of the growth can be attributed to tech and AI.” Energy earnings are expected to rise about 115% from a year earlier, while U.S. oil prices surged roughly 30% in the third quarter amid the ongoing U.S.-Israeli war with Iran. Consumer staples and real estate, sectors unrelated to AI, had among the weakest year-over-year third-quarter earnings growth estimates.
In the second quarter, S&P 500 earnings grew nearly 54% year over year, the highest rate since 2021. Strip out mark-to-market gains at Alphabet and Amazon.com on AI-related investments, and growth came to about 35%, still the highest since 2021. Yet strategists aren’t confident the momentum will last.
Peak Growth Concerns
“A concern for investors is we are kind of approaching peak earnings growth for the current cycle,” Saglimbene said. “A lot of this AI trade is built on continued capex spending, and every quarter we go, and they continue to spend, the hurdle rates get higher and the scrutiny gets larger.” Dhillon noted that earnings for U.S. semiconductor companies are expected to have risen about 136% in the third quarter, versus about 158% in the second quarter. “Earnings estimate revision momentum is starting to cool,” said Nick Raich, CEO of the Earnings Scout, an independent research firm. “We’re still going 100 miles an hour in the AI infrastructure buildout, but three months ago we were going 150 miles an hour.”
Raich said recent reports, including Micron Technology’s, have been strong and suggest other companies are still “reaping the benefits.” Last month, Micron forecast quarterly revenue above estimates and said customers had increased commitments under long-term supply agreements to $32 billion.
Investors must also track how higher interest rates affect corporate profits. U.S. bond yields have risen amid concerns about inflation, higher oil prices and debt problems in France and elsewhere. Heavy borrowers such as utilities face particular risk.
Why This Matters:
The market’s 117% gain since October 2022 reflects genuine economic innovation and corporate profitability gains in AI infrastructure. But ten companies account for a concentrated share of that gain, while nearly 70-80% of earnings growth is attributable to the tech and AI sectors, creating structural vulnerability. When AI advances and capex spending expectations cool—as they historically do in any technology cycle—the impact on broadly diversified portfolios could be severe. Meanwhile, the Federal Reserve’s rate-hiking stance and 24-year highs in Treasury yields pose real headwinds to the valuation multiples that have supported this rally. Pressure is intensifying on tech companies to prove that today’s massive capital spending translates into future profits. For investors building long-term wealth, the question isn’t whether AI is transformative—the earnings data confirms it is—but whether current valuations and market concentration adequately compensate for the risks ahead.