When one stock shakes the market, it’s time to think bigger

The market’s dependence on a few megacaps has been exposed, writes Nigel Green. With that knowledge in mind, how should investors view the future? 

This week, a sharp drop in Nvidia unsettled investors and sent the Nasdaq 100 tumbling.

In a matter of hours, the optimism that had defined the summer gave way to anxiety. The decline was modest in percentage terms, but the reaction was outsized because it revealed just how dependent markets have become on a handful of companies to keep momentum alive.

I have long argued that artificial intelligence will be the defining economic force of this era. Nvidia’s role in powering this revolution cannot be overstated. Its hardware sits at the centre of breakthroughs in computing, data, and automation.

The company deserves its reputation as a leader. Yet its stumble shows something uncomfortable: global markets are leaning too heavily on a narrow group of names, and that makes the system brittle.

Valuations in the biggest tech firms are stretched. The Nasdaq 100 trades at a multiple more reminiscent of the 1990s boom than of a market that should be hedging for risks in growth, inflation, and geopolitics.

The so-called Magnificent Seven have lifted indices to new heights, but they also carry too much of the load. That means when one name falters, the shockwaves travel everywhere.

The lesson here is not to doubt artificial intelligence. Far from it. AI will change productivity, reshape entire industries, and open up fresh frontiers in everything from healthcare to logistics. I believe in its transformative power. The lesson is that investors cannot afford to equate belief in AI with blind faith in a few US megacaps.

There is an entire ecosystem emerging. Data storage, energy supply, cybersecurity, software, cloud services, and the global companies adopting AI tools are all part of the same story.

The real opportunity lies in spreading exposure across this spectrum rather than crowding into the most obvious names. The future winners will not be confined to a single ticker or even a single index.

This moment of market unease arrives as the Federal Reserve faces one of its most closely watched decisions in years. Traders are betting heavily on a September rate cut and expect more to follow.

Treasury yields slipped as investors positioned for easier policy. But such confidence is risky. Inflation has been erratic. Labour markets have softened but not collapsed. Tariff-related price pressures remain. There’s no certainty that the Fed can deliver the smooth path to cuts the market is assuming.

Should Powell signal caution at Jackson Hole or incoming data forces a rethink, investors who are already overexposed to a small basket of richly priced equities will be hit hardest. Concentration risk and misplaced policy bets together create the conditions for abrupt corrections.

Overlay this with geopolitics. President Donald Trump has pushed hard for Russia and Ukraine to resume talks, even urging both sides to show flexibility.

Any prospect of peace is welcome. But anyone who thinks this conflict will resolve quickly or cleanly is ignoring history. The uncertainty around resources, currencies, and trade flows will continue to weigh on global markets.

Against this backdrop, the question every investor should ask is: how do I participate in the AI boom without being cornered by it? The answer is diversification. Not as a buzzword, but as a discipline. Diversification within AI — across the infrastructure, applications, and adopters. Diversification across sectors, because growth is not only a tech story. And diversification across geographies, because the AI economy will not be limited to America.

I see this volatility not as a setback, but as an inflection point. When investors are forced to recognise concentration risk, it creates opportunities. The most durable gains are made not by chasing what has already soared, but by identifying the next stage of the cycle — the companies and regions that will benefit as AI’s reach broadens.

Nvidia remains a leader, and I continue to believe in its trajectory. But the market’s overreaction to its slip shows that the reliance on one or two champions is unhealthy. A single company should not have the power to unsettle portfolios worldwide. Investors who take this as a cue to rethink positioning, to spread their bets more intelligently, will be rewarded.

AI is real, it is global, and it is only just beginning. The task now is to invest in it with balance, breadth, and foresight.

The market’s dependence on a few megacaps has been exposed. The opportunity is to move beyond that dependence, and in doing so, to capture the true scale of the transformation ahead.

Nigel Green, is the group CEO and founder of deVere Group, an independent global financial consultancy.

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