The US stock market has illustrated a growing trend of concentration over the past five years, with the first-quarter rotation in 2026 doing little to alter the established pattern. The technology sector, which faced significant declines earlier in the year, has been responsible for more than 70% of market losses in the first quarter, while also driving over half of the gains observed in April.
After a challenging start for tech stocks in the previous quarter, analysts had hoped for a broader market performance. However, the same technology giants that contributed to the market’s downturn in the first three months have been pivotal in its recovery this April. Notably, five major stocks—Nvidia, Apple, Microsoft, Amazon, and Alphabet—now make up approximately 23% of the Morningstar US Market Index, reflecting a considerable dominance over market fluctuations.
This concentration has increased significantly over time, with the top five stocks accounting for 16% of the index just five years ago, and only 9% a decade prior. As the first quarter unfolded, US market performance sharply diverged across sectors, with declines exceeding 8% in financial services, communication services, consumer cyclicals, and technology. In contrast, the Morningstar US Energy Sector Capped Index saw a remarkable rise of 38%, largely propelled by escalating oil prices linked to ongoing geopolitical tensions in the region.
As a result, the overall US Market Index slipped by 4.2% during the quarter, reflecting nearly 70% of that drop due to losses in technology. Despite only making up a mere 3.4% of the index, the resurgence in energy stocks wasn’t adequate to counterbalance substantial losses from the tech sector, which comprises 32.6% of the index.
April, however, marked a sharp turnaround for the technology sector. Stocks in this domain rebounded significantly, climbing by 15%, while consumer cyclical stocks rose by 12%, lifting the overall US market into positive territory for the year. The energy sector experienced a retreat of about 10% in April as oil prices retracted but still maintained a 24% year-to-date gain.
The technology sector has been a crucial contributor to the year’s gains so far, attributing 1.6 percentage points to the US market’s 4.7-point gain, equating to a 34% increase. Semiconductor giants Nvidia and Broadcom have especially bolstered this performance, together accounting for about 21% of the market’s advance.
This latest phase of tech dominance continues a broader trend that has been evident for several years, where technology has consistently accounted for over half of both market gains in rising quarters and losses during downturns.
Despite a brief rotation away from tech stocks in the first quarter, market concentration levels have remained high. The dominant five stocks currently account for 23% of the US Market Index, while the top 10 collectively make up 33%. Though slightly reduced from the end of 2025, when the figures were 25% and 36% respectively, the current concentration levels are significantly higher than at the start of 2023, where the top five shared 17% and the top 10 24%.
In 2026, tech-related industries have topped market performance charts, with semiconductor equipment and materials leading the way with a 47.6% increase. Key players such as ASML Holding, Applied Materials, and Lam Research have driven impressive gains.
Conversely, software application stocks have emerged as the year’s poorest performers, plummeting by 22.7% due to concerns about AI’s potential impact on the sector. Major firms like SAP and Salesforce have each seen close to a 30% decline, reflecting the broader anxieties in the market. Additionally, the advertising sector has struggled with a 20.9% drop, primarily influenced by declines in companies such as AppLovin, while the gambling industry has also suffered setbacks with a 20.7% decrease.
