Many investors know that the S&P 500 is heavily weighted to companies with exposure to the artificial intelligence sector. Data shows that the market capitalization of AI pure plays in the index is now reaching record levels last seen in the 19th century.

AI Dominance in the S&P 500

AI stocks make up 49% of the S&P 500, which is tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY), which could explain some of the fears of an AI bubble popping.

Data from Bianco Research shared on social media shows that along with making up 49% of the S&P 500, the 41 companies named as AI pure plays in the index make up around two-thirds of the S&P 500’s year-to-date market cap changes.

Bianco Research’s Jim Bianco takes things a step further, with just how concentrated in AI the S&P 500 could be had rules been changed or could become in the future.

"If SpaceX was in the $SPX now, AI-related stocks would be 51% of the index. With Anthropic and OpenAI coming public, add them to the $SPX in 2027 and AI would be ~55% of the $SPX," Bianco tweeted.

The S&P 500 declined to change its rules to include SpaceX (NASDAQ:SPCX) stock early, instead holding to the normal principles that a company needs profitability and has sufficient float.

Bianco shares that the precedent of AI stocks making up this much of the U.S. stock market dates back more than 100 years.

"The last time a single theme was >50% of the $SPX was the railroads in the 19th century."

Bianco shared the list of AI pure plays in the S&P 500, which includes all of the top 10 holdings in the SPY:

While all the Magnificent Seven stocks are included in the index, the list also includes AI utilities, AI capital equipment companies and a list of AI direct companies across software, cybersecurity and other technology fields.

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Going Back to the Railroads

The S&P 500 was launched in 1957, so it hasn’t been around long enough to be dominated by the railroad sector.

The 1880s did see the overall U.S. stock market capitalization dominated by the sector, which emerged as the top sector and dominated the country.

In 1881, railroad companies made up 63% of U.S. stock market capitalization, according to Bank of America data.

Today, railroads make up less than 1%. The railroad sector has been a strong performer, though, beating the overall U.S. stock market since 1900.

A newsletter from BeBusiness Smart notes that sectors have dominated the S&P 500 or the overall U.S. stock market index at other times, but never near the 63% seen from the late 1880s to 1900. Here were some standout time periods of sector dominance:

  • Railroad, 1900: 63%
  • Energy, 1980: 28%
  • Technology, March 1980: 33% to 35%
  • Financials, before 2008: 20% to 22%
  • Technology, October 2026: 40%+

Railroads led to one of the greatest expansions of the U.S. economy, lowering freight and transportation costs and connecting many areas across the country.

AI is viewed as a technology that could change and impact multiple sectors in similar ways. The question is whether AI representing more than 50% of the U.S. stock market would be good or raise even more questions about a potential bubble.

Read Also: AI Bubble Could Be Ready to Pop and Jim Cramer May Be the Warning Sign

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