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For almost 18 months, the broad S&P 500 (SPX) index hasn’t seen a daily drop of over 2%. While a longer consolidation stretch was present in the early 2000s up until the Great Recession, there has never been such a strong market concentration.

The top 10 stocks now comprise 38% of the SPX market cap. According to Bloomberg Intelligence, such winnowing led to a precipitous group of companies above the 200-day moving average, suggesting weak market breadth. 

(Click on image to enlarge)

Image credit: Bloomberg Intelligence

In other words, the market consolidation and subsequent concentration will likely lead to a reversal, as seen in previous dislocations. This is further compounded by the low 19% of all US stocks outperforming the lowest index in 20 years. 

At the same time, it is not clear that a sudden halt is ahead, considering that the AAII Sentiment Survey shows a 44.5% bullish outlook, above the historical average of 37.5%. What is clear is that some companies have higher concentrations of human capital, patents, and tech than others.

Which of these $3 trillion companies is the most likely to cross the $4 trillion milestone over the next few years, even after the potential market correction?

Nvidia (Nasdaq: NVDA) – $3.05 Trillion Market Cap

Although Super Micro Computer (NASDAQ: SMCI) outperformed Nvidia at 207% vs 163% year-to-date respectively, Nvidia had the most rapid rise over the last 10 years, even outperforming Bitcoin (BTC). As such, Nvidia is the most likely candidate for a major price correction.

As a fabless semiconductor company, Nvidia heavily relies on Taiwan Semiconductor Manufacturing Company (NYES: TSM) to materialize its chip designs. The geopolitical tensions between the US and China are staving off greater capital inflows into TSMC. At the same time, if a hot scenario is to unfold, Nvidia and the rest of the market would be first to topple.

By the same token, TSMC would divert capital inflows from Nvidia if tensions fizzled into nothing following the US presidential elections. More importantly, it is a speculative thesis if generative AI infrastructure will be needed at such a high level as NVDA’s price-to-earnings (P/E) ratio of 72.52 suggests. 

Namely, some studies suggest that the current approach to large language models (LLMs) has a plateau that will not benefit from a greater amount of deployed GPUs. Lastly, Nvidia’s rapid rise could have a boomerang effect. After locking in their stock profits, Nvidia could see an outflow of their most senior talent that powered the company’s growth in the first place.

Microsoft (Nasdaq: MSFT) – $3.36 Trillion Market Cap

Under Satya Nadella’s leadership, Microsoft has achieved 1,085% growth since becoming the third CEO in February 2014. By all measures, it is unlikely that Microsoft will end up like IBM (NYSE: IBM). Quite the opposite, through its wide moat across Windows OS, productivity software suites, gaming, and Azure cloud computing, the company has a deep ecosystem of consistent revenue.

Microsoft demonstrated this with a 21% YoY increase in free cash flow to $21 billion, per FY24 Q3 earnings call. Across divisions, Microsoft’s Azure continues to catch up with Amazon Web Services (AWS) with 31% revenue growth, followed by 62% revenue increase for Xbox content following Activision acquisition.

In turn, this excellent network effect across services is only likely to increase with the integration of AI Copilot. This is compounded by Microsoft’s habit of strategic acquisitions, such as GitHub and LinkedIn, further widening the moat.

More importantly, considering the fusion trend between corporate and government power, antitrust concerns will likely take a back seat to utilitarianism. While not a high-grower like Nvidia, this makes Microsoft the most sustainable grower years ahead.

Apple (Nasdaq: AAPL) – $3.28 Trillion Market Cap

After somewhat dampened global demand, Apple’s iPhone sales saw a 52% surge in April in the Chinese market. As of Q2 2024, iPhone sales accounted for 50.46% of total quarterly revenue of $90.75 billion, lower than the $92.84 billion in the year-ago quarter.

Following the Vision Pro flop, the company clearly needs to change course from devices to more exciting services. But it is no secret that Apple has been perceived as dried up in the innovation department for years.

In May’s Q2 2024 earnings, services delivered $23.8 billion in sales compared to $20.9 billion in the year-ago quarter. So far, Apple counted on record-breaking stock buyback programs to boost AAPL stock, but this can only carry shareholder loyalty to a point considering other choices.

Apple’s market share is not only stagnant but decreased from 21% in Q1 2023 to 16% in Q1 2024. Despite share repurchasing and Apple’s brand loyalty, fortified by an intentionally walled-off ecosystem, AAPL stock barely caught up with the broader market S&P 500 index at 15.40% year-to-date performance.

However, Apple’s successful AI integration may change this momentum, inviting new customers to an otherwise unavailable experience. This will be a challenging task considering strong Microsoft competition in the form of the latest Copilot+ initiative powered by Snapdragon X Elite and X Plus chips.

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