To The Moon

$S&P 500(.SPX)$ $Apple(AAPL)$ $Microsoft(MSFT)$ $NVIDIA(NVDA)$ $Amazon.com(AMZN)$

This will help explain what’s happening with the S&P 500. The five biggest companies in the world—Apple, Microsoft, Nvidia, Alphabet, and Amazon—hold significant weight in the index. If you look at the price chart for the past 30 days, you’ll notice something interesting: only Apple is in the green.

Microsoft, Nvidia, Alphabet, and Amazon are all down, and Apple is now the only company still valued above $3 trillion, while Microsoft and Nvidia have slipped below that mark. So, to understand what’s going on with the S&P 500, let’s focus on the three biggest companies and uncover key insights that might make you rethink buying into the index.

Apple: The Biggest Company, But Slowing Growth

Apple is currently the largest company in the world, but its sales figures tell a different story. From 2020 to 2021, when COVID-19 hit, Apple’s sales surged—likely due to people spending more time at home and having extra disposable income. As a result, Apple’s stock price climbed.

However, despite Apple’s profitability stagnating over the past four years, its stock price has continued to rise. In fact, Apple’s projected profit for 2024 is lower than in 2021, showing either zero or negative growth, depending on how you measure it. This is surprising, considering the widespread belief that Apple’s profits are soaring.

A major reason for this is that iPhone sales still account for the largest share of Apple’s profitability, with the U.S. as the top market, followed by China. However, iPhone sales in China have declined sharply—dropping 18.2% in 2025. Apple has now lost its top spot in China, overtaken by Huawei.

Why Are Chinese Consumers Choosing Other Brands?

One key reason is pricing. Apple charges a premium for features that many Chinese competitors offer at lower prices—often with superior technology. For example, Huawei and other Chinese brands have long used advanced materials and display technologies before Apple adopted them.

What Does Warren Buffett Think?

Warren Buffett, one of the greatest investors of all time, has been an Apple shareholder since 2016. He built his position up to 1 billion shares by 2018, when Apple was trading at a price-to-earnings (P/E) ratio of 15-20x, making it an attractive investment. However, after 2018, Buffett stopped increasing his position.

Instead, as Apple’s stock price climbed and its P/E ratio reached 30x, he started trimming his stake. By 2024, despite Apple’s profitability stagnating, its stock price had continued to rise—pushing its valuation to an expensive 40x P/E ratio. As a result, Buffett significantly reduced his Apple holdings, cutting them from nearly 900 million shares to just 400 million.

If he truly believed Apple’s stock would continue skyrocketing, why would he sell such a large portion? His actions speak louder than words.

What Is Buffett Buying Instead?

Interestingly, Buffett has also reduced Berkshire Hathaway’s small stake in the S&P 500 while purchasing shares of Domino’s Pizza. At first glance, this might seem like a strange move—choosing an underperforming stock over Apple or the broader market.

But Buffett is a value investor. He looks for companies trading at attractive valuations with strong long-term potential. While it may take time to see whether his strategy pays off, history suggests that investing in undervalued businesses often leads to strong returns over time.

So, what do you think? Would you still buy Apple stock or the S&P 500, or is it time to look elsewhere?

If you practice this consistently, you'll realize that you have a strong chance of generating solid returns for your portfolio.

Now that we’ve covered Apple, let’s move on to the second-largest company in the world, which also has a major impact on the S&P 500—Microsoft.

Microsoft: A Surprisingly Weak Performer

Let’s start by assessing Microsoft’s underwhelming one-year performance. This is just a gut check because, historically, investing in Microsoft has been quite popular. However, compared to other mega-cap companies, Microsoft has been the worst performer recently. Despite its profitability reaching record highs, Microsoft’s stock is down 3% over the past year.

From a fundamentals perspective, Microsoft actually looks stronger than Apple. Apple’s profits have stagnated, while Microsoft’s continue to grow. So why has Microsoft’s stock struggled?

A key reason is its heavy investment in AI and data centers. The company has been pouring capital into these areas, but the returns haven't materialized yet. Meanwhile, Apple has taken a different approach, choosing not to make similar investments. Perhaps the market is punishing Microsoft for what it perceives as an uncertain bet.

Additionally, Microsoft has guided for slower growth in its cloud business for the second quarter of 2025. That could be another factor weighing on investor sentiment.

However, as an investor, I see more value in Microsoft than Apple. Microsoft currently trades at a price-to-earnings (P/E) ratio of just 31x—below its five-year average—and, more importantly, it still has strong growth potential.

Let me know in the comments whether you agree.

Nvidia: The Market Darling That Might Be Peaking

Now, let’s move on to the third-largest company in the S&P 500—one that has been incredibly popular among investors: Nvidia.

After Tesla’s dominance in 2022, Nvidia took over as the market favorite in 2023 and beyond. But could the baton now be passing to another company? Let’s take a closer look at Nvidia’s recent performance and why it might be a drag on the S&P 500.

If we compare Nvidia’s stock price to its profitability, we see that a year ago, both revenue and net income were rising, and the share price surged alongside them. Back in June 2024, Nvidia even completed a 10-for-1 stock split, which the market loved, even though it was just a cosmetic change.

Since then, Nvidia’s profitability has continued to grow quarter after quarter. The percentage growth has been incredibly strong—perhaps even unsustainable. Yet, despite reaching an all-time high of $145, something unusual has happened.

Why Did Nvidia’s Stock Drop?

For its Q1 2025 earnings, Nvidia posted record-high revenue and net income, though its profit margins slipped slightly. Despite this, the stock dropped from $145 to $110—a 15% correction. Why?

From my experience, the market might be interpreting this as a peak in profitability. Investors often assume businesses grow in a straight line, but in reality, industries move in cycles. We may have already seen the peak of the AI and semiconductor cycle, and future growth could slow or even turn negative.

One major red flag: Nvidia’s largest customer, Microsoft, has begun canceling data centers and cutting back on spending. Microsoft has led the charge in AI infrastructure investments, committing $80 billion. Other tech giants like Alphabet, Meta, and Amazon have also been aggressively building AI capabilities. However, there are growing concerns that the era of unlimited AI spending may be coming to an end, which could directly impact Nvidia’s sales.

The Cisco vs. Nvidia Parallel

Many investors have compared Nvidia’s rise to Cisco’s dominance during the dot-com bubble. Cisco was once the king of hardware, just as Nvidia is today. The question is whether Nvidia will follow a similar trajectory—experiencing explosive growth before facing a prolonged slowdown.

Of course, this is just my perspective, not a buy or sell recommendation. You should analyze the data and form your own conclusions.

Would you still bet on Nvidia, or do you think its best days are behind it? Let me know your thoughts!

Is Nvidia Following the AI Bubble Trend?

Some argue that the current AI boom is different from past bubbles because Nvidia is generating substantial real profits, unlike companies during previous tech bubbles. However, hype is still hype—when trends shift, profits can dry up, turning into losses.

This graph, originally plotted until 2024, has been extended with additional green lines to illustrate Nvidia’s performance over the past year. As you can see, Nvidia reached new all-time highs but is now showing signs of a downward trend. Many experts consider this a buying opportunity—and perhaps it is—but personally, I remain skeptical.

If demand weakens significantly, as it did with Cisco in the past, inventory could pile up and eventually become obsolete, leading to costly write-offs. No one could have predicted how the AI landscape would evolve, which is why we must always approach high-expectation stocks like Nvidia with caution.

Nvidia’s Impact on the S&P 500

Nvidia has been a key driver of the S&P 500, contributing an impressive 22.4% of returns last year thanks to its triple-digit stock gain. In contrast, companies like Apple, Amazon, and Meta contributed only 5-7%.

Without Nvidia’s performance, the S&P 500 would have looked much weaker. But now, we must consider the reverse scenario: if Nvidia starts to decline, it could drag the S&P 500 down, just as it helped push it up.

At the moment, Microsoft is also weighing down the index, while Apple is the only company holding it up—similar to its role in 2022. However, Apple’s profitability remains uncertain, and even Warren Buffett has started selling his stake.

If Apple can’t hold up the market alone, what happens next? Share your thoughts in the comments.

What’s Next for the Magnificent 7?

Over the past few years, the Magnificent 7—Apple, Amazon, Microsoft, Nvidia, Tesla, Alphabet, and Meta—have delivered exceptional returns, outpacing the rest of the S&P 500 (S&P 493). These companies continued to grow profits even while others struggled.

However, forecasts suggest that this gap will narrow. Analysts expect the profit growth of the Magnificent 7 to decline while the rest of the S&P 500 begins to catch up. If this holds true, should investors shift some focus toward small-cap stocks that may have greater upside potential?

Beyond Big Tech: Exploring Other Investment Strategies

The S&P 500 is heavily dominated by technology stocks, but is there a smarter way to invest in strong U.S. companies? One alternative is to explore diversified funds such as SWAP U.S. Equity Fund (SCD).

This fund’s top 10 holdings include companies like Pfizer, AT&T, Coca-Cola, Cisco, and BlackRock—diversified across financials, healthcare, consumer staples, and industrials, with some exposure to energy. Could this serve as a complementary piece to your portfolio if Big Tech starts to underperform?

True Diversification: Are You Really Spreading Risk?

Many investors diversify by adding global index funds, but here’s an interesting fact: 72.9% of global index fund allocations still go to U.S. equities. That means the top holdings—Apple, Nvidia, Microsoft, Amazon, and Meta—are largely the same as the S&P 500. So how different is it really?

More importantly, one key market is noticeably missing: China. The Chinese stock market and the Hang Seng Index have recently outperformed the S&P 500 by a wide margin. Yet, many investors remain underallocated in China.

If you're serious about diversification, consider whether it makes sense to add some exposure to China, especially as its AI sector continues to grow. Could China defy expectations and emerge as the leader in AI? The market is already pricing in that possibility.

Conclusion

The old belief that "China is uninvestable" might need to be reconsidered. Maybe the time to rethink that notion is now.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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