U.S. stock markets are increasingly reliant on a small group of technology companies, raising concerns about their stability. As of the end of the third quarter of 2025, the eight largest U.S. companies, primarily in technology, accounted for a staggering 36.1% of the MSCI USA Index’s total value. This level of concentration surpasses that seen at the height of the dot-com boom, leaving investors vulnerable to potential market downturns.
The so-called “Magnificent 7″—which includes Apple, Alphabet, Microsoft, Amazon.com, Meta Platforms, Tesla, and Nvidia—now represents approximately one third of the S&P 500’s overall market capitalization. This concentration underscores how dependent the U.S. market is on the performance of a limited number of firms, creating significant risks for investors should these companies falter.
International Markets Offer Diverse Opportunities
In contrast, developed markets outside the U.S. present a more balanced investment landscape. According to the MSCI EAFE Index, which tracks equities in Europe, Australasia, and the Far East, its largest holdings are more diverse, spanning technology, consumer staples, healthcare, financials, and energy. The top eight stocks in this index account for just over 10% of its total weight, significantly less than in the U.S.
As of September 2025, financials constitute the largest sector in the EAFE Index at around 25%, while technology is a more moderate 8%. This structural difference allows international markets to avoid the pitfalls associated with over-reliance on a single sector or a handful of companies, a stark contrast to the U.S. market’s current dynamics.
The potential for higher yields also makes international equities appealing. Current data shows that the average dividend yield for the MSCI EAFE Index is 2.9%, compared to 1.2% for U.S. stocks. With U.S. valuations generally higher across all sectors, investing abroad could help investors capitalize on more attractive opportunities.
Currency Trends and Investment Strategy
Currency fluctuations further complicate the investment landscape. The first half of 2025 marked the weakest performance of the U.S. dollar since 1973, driven by rising debt levels and uncertainty surrounding U.S. policy. As growth expectations align more closely between the U.S. and other developed economies, a weaker dollar could enhance returns for U.S.-based investors in non-dollar assets.
Investors who have not actively rebalanced their portfolios over the past 15 years may find themselves inadvertently overexposed to the performance of major tech stocks. The question now is not just whether these companies can continue to thrive, but also if it is wise to maintain such heavy investments in them given their inflated valuations and the historical concentration risks they present.
Reallocating even a small percentage of U.S. equity exposure toward developed international markets can mitigate this overconcentration risk and take advantage of favorable valuations abroad.
The historical precedent shows that reliance on a singular theme in market leadership is rarely sustainable. Current dependence on the Magnificent 7 not only reflects their remarkable performance but also poses systemic vulnerabilities. By diversifying investments internationally, investors can access a broader range of opportunities and prepare their portfolios for the next phase of global market evolution.
The views expressed in this article are the author’s as of September 30, 2025, and are subject to change without notice. The information presented is based on sources deemed reliable, but its accuracy is not guaranteed. This does not constitute a recommendation or offer to buy or sell any security and does not consider individual investment objectives or circumstances. All investments carry risk, including the potential for loss.
