You’ve probably been reading a lot about AI, Nvidia and the Chinese firm DeepSeek in the last three days. Billions were wiped off US tech share prices on Monday as the emergence of DeepSeek as the number one downloaded AI app rocked confidence in the tech giants in America.
In a nutshell? Someone has seen something smart, and thought, “I bet I could improve on that”.
Here’s the story of modern technology in one chart, which I like to call “IT ONLY GETS CHEAPER!” It’s for computer memory, but you could show it for almost any part of the tech stack
Source: 7IM/Our World in Data, shows USD Price of computer memory per Terabyte, adjusted for inflation
Someone is always coming for the leaders. Big companies are big targets. Huge companies are HUGE targets. It is quite literally the story of competition and capitalism playing out in front of our eyes.
And so, to markets. We’ve been talking about the top ten concentration risk in the US for a couple of years now.
On Monday this week, Nvidia lost the most value a company ever has in a day (beating its own record).
Cue lots of headlines about “the US market ☹”
But…. 349 companies in the S&P 500 were positive on Monday! Waaaay more than half!
The problem is that if you put £1000 into the S&P 500, £360 goes into the top ten*. And 90p goes into the bottom ten companies. So, no matter how good a time those bottom ten companies have, they can’t make a dent. They could all double, and no-one would notice.
So, who are these little guys in the smaller bit of the US market. Let’s give you a chance to get to know some of the smallest businesses, stocks 401 – 500 in the list. Some of the plucky underdogs you haven’t heard of …
Only … you have heard of them:
Source: Dominos Pizza/Hasbro/Walgreen Boots/Molson Coors/Paramount Pictures/Black and Decker/Ralph Lauren.
And they aren’t that “little”! Many of them have been around for decades, have loyal customers, quality brands, and don’t care too much about the cost of microchips.
They offer you the chance to watch a box office hit, while eating a pepperoni pizza, washed down with a cool beer. There’s dolls and drills, polo shirts and prescriptions.
It might be worth having a little less in the giants, and a little more in these stocks … and there’s a really simple way to do it:
Equal-weight investing spreads your risk. Invest £1000, and you put £2 in every stock – whether it’s a tech giant
… or arguably the most famous soup brand in the world (sorry Heinz).
Source: Andy Warhol
*In fact, if you work up from the bottom of the index, your £360 contribution buys you 442 of the 500 stocks!
However, the giants are the size they are for a reason, and it would be foolish to imagine that they are going away any time soon.
What wasn’t in the news yesterday was that billions were ‘wiped’ back on US tech share prices as many felt the panic caused by the emergence of a relatively unknown competitor had been overdone – it was a bit of a wakeup call nonetheless.
As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.
Yours sincerely,
Graham Ponting CFP Chartered MCSI
Managing Partner
