US and European stock futures rallied recently after explosive earnings from Big Tech renewed optimism over corporate profitability.

Microsoft shares are poised to open higher following the announcement of more than $30 billion in AI infrastructure spending this quarter alone, while Meta surged more than 11% in after-hours trading after posting stronger-than-expected results and deepening its commitment to artificial intelligence.

Yet as investor sentiment climbs, global financial advisory giant deVere Group is warning that the underlying structure of the market is becoming increasingly unbalanced—and may be laying the groundwork for trouble ahead.

“This is not a tech bubble—yet,” says Nigel Green, CEO of deVere Group.

"But several classic warning signs are flashing. Valuations are elevated, market leadership is dangerously narrow, and sentiment is being driven more by momentum than discipline. This combination deserves caution.”

The composition of the S&P 500 has become more distorted in recent months.

Big Tech now accounts for approximately 32% of the index, with Communications Services, which includes Meta and Alphabet, contributing another 9.6%. Together, these two sectors make up over 41% of the benchmark.

At the same time, the top 10 companies now represent nearly 40% of the entire S&P 500 market cap.

That level of concentration is “higher than what was seen at the peak of the dot-com boom in 2000,” continues the deVere Group CEO.

“The S&P 500 is no longer the broad, diversified index people think it is. It has become increasingly dominated by a small group of companies. Investors are often unaware that they’re excessively exposed to the same handful of names.”

Microsoft reported quarterly revenue of $76.4 billion, an 18% year-on-year increase, driven in large part by demand for cloud and AI services.

The company’s plans to ramp up AI investment to historic levels sent a strong signal to markets that the arms race in artificial intelligence is far from over. Meta also delivered a 22% jump in revenue and a 36% rise in net income, with executives outlining an even deeper push into AI development and infrastructure expansion.

These numbers are impressive by any measure and reflect genuine, fundamental growth.

But deVere warns that the strength of these results is part of the problem. The rally has become increasingly dependent on a narrow segment of the market.

When this kind of leadership becomes too concentrated, markets become more fragile and vulnerable to corrections.

“The AI growth story is real and the earnings are real. But that doesn’t mean the current pricing is always justified,” says Nigel.

“Some of the leading companies are now trading on expectations that are, arguably, too optimistic. If even one or two of them disappoint, the effects could cascade throughout the broader market.”

Valuation metrics are beginning to mirror those seen in previous periods of overexuberance.

The S&P 500 is trading at a forward price-to-earnings ratio above 21, and tech-specific ratios like price-to-sales and price-to-cash flow have pushed into historically elevated territory.

Meanwhile, investor enthusiasm continues to rise, fuelled by AI headlines, strong results, and speculative capital.

This is precisely the point in the cycle when investors “should take a step back and assess whether their portfolios are truly diversified.”

Many believe they are broadly invested but are, in fact, highly exposed to just a few stocks due to the structure of the major indices.

“This isn’t about avoiding tech or turning bearish on AI,” notes Nigel Green. “This is about restoring balance.

“Portfolios must be positioned to withstand both continued upside and the inevitable periods of volatility. Relying too heavily on a narrow group of mega-cap stocks, no matter how strong they are today, is a risk no serious investor should ignore.”

He concludes: “We’re not saying the bubble has already formed. But the conditions that usually precede one are clearly emerging."

“Now’s the time to act, not when it’s too late to do anything about it.”