The S&P 500 (INDEXSP: .INX), one of the most widely followed US indexes, represents nearly 80% of the total market value of US-listed companies.
Unlike the Dow Jones Industrial Index (INDEXDJX: .DJI), which focuses on 30 blue-chip stocks, the S&P 500 encompasses a broader spectrum of more than 500 companies.
The index’s broad representation has attracted huge investor interest.
As of the end of 2023, an estimated US$10 trillion in assets were indexed to the S&P 500, with another US$6 trillion in assets benchmarked against it.
For Singaporean investors looking for exposure to the US index, the SPDR S&P 500 ETF Trust (SGX: S27) offers an accessible option.
The heavyweights of the S&P 500 index
The S&P 500 is weighted by market capitalisation, meaning larger companies have a greater influence on its performance. So, while the index hosts 500 companies, a handful of giants dominate the index.
Let’s look at the top 10 contributors.
Sectors are based on the Global Industry Classification Standard (GICS)
Unlike Singapore’s Straits Times Index (SGX: ^STI), the S&P 500 is heavily weighted towards technology companies.
The Magnificent 7 stocks, namely Alphabet (NASDAQ: GOOG), Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Meta Platforms (NASDAQ: META), Microsoft (NASDAQ: MSFT), NVIDIA (NASDAQ: NVDA) and Tesla (NASDAQ: TSLA), feature prominently in the top 10 largest contributors to the index.
Together, they account for over 31% of the S&P 500’s weighting, giving them outsized influence on the movement of the index.
The Magnificent 7: Land of the tech giants
iPhone maker Apple (NASDAQ: AAPL) is the largest component in the S&P 500 with a market capitalisation of US$3.48 trillion, followed by software provider Microsoft (NASDAQ: MSFT) which weighs in at a little under US$3.1 trillion.
Just behind the duo is NVIDIA (NASDAQ: NVDA) which has a market cap of over US$2.9 trillion.
The California-based company has benefited tremendously from skyrocketing demand for its graphics processing units (GPUs) amid an AI-led boom.
Next on the list is Amazon (NASDAQ: AMZN), founded by billionaire Jeff Bezos.
The online retailer is one of the companies benefitting from the boom in cloud computing via its Amazon Web Services (AWS) division.
Amazon’s market cap was just under US$1.9 trillion last Friday.
Speaking of billionaires, Mark Zuckerberg continues to lead as the CEO of Meta Platforms (NASDAQ: META). The social network firm, which sports a US$1.3 trillion market cap, is home to popular sites such as Facebook, Instagram, WhatsApp, and Messenger.
Rounding up the tech trillion-dollar club is Google’s parent company, Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) with a market cap of over US$2 trillion.
Alphabet has six products with over a billion users, namely Android, Chrome, Gmail, Google Play, Google Search, and YouTube.
The laggard among the group is Tesla (NASDAQ: TSLA), led by the mercurial Elon Musk. The electric carmaker has a market cap of around US$670 billion.
A stalwart of the old economy
Berkshire Hathaway (NYSE: BRK.B), led by famed investor Warren Buffett, recently crossed the trillion-dollar mark in market value.
The company can be considered a representative of the old-school economy.
Under the Berkshire Hathaway conglomerate are businesses such as Burlington Northern Santa Fe’s railroads, Berkshire Energy, and Berkshire Hathaway’s property and casualty insurance business.
Beyond the above, Buffett’s company also hosts a wide variety of smaller businesses, ranging from batteries (Duracell), home building (Clayton Homes), undergarments (Fruit of the Loom), manufacturing (Precision Castparts) and more.
Not everything is a traditional business, though.
Interestingly the Oracle of Omaha has also made Apple its largest portfolio stock holding, valued at US$91.6 billion.
Berkshire Hathaway also owns a little under US$1.8 trillion in Amazon shares.
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Disclosure: Chin Hui Leong owns shares in Alphabet, Apple, Amazon, Berkshire Hathaway, Meta Platforms, and Microsoft.
