Semiconductor companies have grown to a record 19.7% of the S&P 500 index, nearly quadrupling since June 2020 as Nvidia and peers benefit from the AI boom. Massive passive fund inflows and self-reinforcing buying cycles have driven valuations to levels not seen before, but warning signs are flashing: the market is trading at a price-to-sales ratio of 3.22, far above historical norms, raising the question of whether hyperscaler spending on AI infrastructure will ever justify these valuations.
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Semiconductor companies now represent 19.7% of the S&P 500, nearly four times their roughly 5% weighting in June 2020. Nvidia has been the largest driver, but the sector has broadened to include Broadcom, TSMC, ASML, AMD, Micron, and SanDisk. ETF inflows have exceeded $1 trillion（約160兆円） year-to-date as of late June 2026, running roughly 45% ahead of last year's record pace.
Why it matters
A self-reinforcing cycle is at work — strong performance raises a stock's index weight, higher weights compel passive funds to buy more shares, and that buying pushes prices and weights higher still. However, valuation warnings are stacking up: Bank of America's Bubble Risk Indicator scored 0.91 for the PHLX Semiconductor Sector, the S&P 500's price-to-sales ratio sits at 3.22 (well above its long-term historical average of 1.84), and the Buffett Indicator stands at 231.8%, signaling the market is "significantly overvalued." The key unresolved question is whether the billions hyperscalers are spending on AI infrastructure will generate returns that justify current semiconductor valuations.
What to watch
The concentration of chip stocks in the S&P 500 has reached levels without historical precedent — chips were just over 8% before the dotcom crash, making today's 19.7% share unprecedented. Bank of America's Bubble Risk Indicator also registered 0.82 for the Technology Select Sector.
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