Nvidia Corp. (NASDAQ:NVDA) is nearing a $6 trillion valuation as major indexes hit records, but Rosenberg Research founder David Rosenberg says that strength is masking "a whole lot of pain" across the broader market.

Speaking on CNBC Tuesday, Rosenberg said weak market breadth, a measure of how widely gains are shared across stocks, can eventually signal where headline indexes are headed.

"Breadth, with a lag, ultimately leads what’s going to happen with prices," he said.

Rosenberg said the average S&P 500 stock entered the week about 20% below its 52-week high, while the median stock was down 17%.

AI Giants Are Carrying the Market

Citing legendary Merrill Lynch strategist Bob Farrell, Rosenberg said healthy markets tend to have widespread participation.

Rosenberg said the market has instead become increasingly concentrated in a small group of AI-linked companies over the past several months.

"If you’re that bullish on AI, just focus on the hyperscalers, focus on the semiconductors," Rosenberg said. "The rest of the stock market is not really behaving that well."

Rosenberg did not name individual companies, but Microsoft, Amazon and Alphabet are among the hyperscalers investing heavily in AI infrastructure. Meta Platforms Inc. (NASDAQ:META) is also ramping AI spending while expanding its consumer AI push with Muse.

On the semiconductor side, Nvidia supplies the GPUs powering much of the AI buildout, while Broadcom Inc. (NASDAQ:AVGO) is benefiting from demand for custom AI chips and networking equipment.

The gap widened sharply in September. The cap-weighted S&P 500 gained 0.2%, while its equal-weight version fell 4.4%, MarketWatch reported.

Nvidia now carries more index weight than the smallest 256 S&P 500 companies combined.

What Could Break the AI Trade?

Rosenberg said the eventual break may come not from AI capital spending itself, but when investors start questioning whether future revenues justify that spending.

"Ultimately it’s going to be the future revenue flow that’s going to determine whether or not the return assumptions make sense right now," he said.

Rosenberg pointed to the Nasdaq’s March 2000 peak, saying investors still cannot clearly identify what the alarm bell was at the top of the dot-com boom.

For today’s AI trade, he said weaker company guidance could be the signal that begins changing market sentiment.

Prediction Traders See Low 2026 Risk

Polymarket traders put about a 6% chance on a defined AI industry downturn by Dec. 31.

The contract requires at least three stress events within 90 days, with possible triggers including Nvidia closing 50% below its all-time high and the iShares Semiconductor ETF (NASDAQ:SOXX) falling 40%.

That is a far steeper fall than the guidance cut Rosenberg says could start to turn sentiment.

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