Markets

The Dominance of U.S. Companies in Global Markets

Published

3 years ago

February 20, 2020

Jenna Ross

The Dominance of U.S. Companies in Global Markets

U.S. Companies Dominate Global Markets

Are global indexes as “global” as you think they are?

With the aim of tracking market performance around the world, these indexes incorporate securities from various regions. However, while the number of securities may be relatively well diversified across countries, a dollar perspective tells a different story. When market capitalization is taken into account, country weightings may become much more unbalanced.

Today’s visualization is based on a concept by S&P Dow Jones Indices that shows the percentage of U.S.-based companies in global sectors and industries as of December 31, 2019. The calculations reflect the market capitalization of companies in the S&P Global Broad Market Index (BMI), an index that tracks over 11,000 stocks across 50 developed and emerging economies.

Percentage of U.S. Companies by Sector

U.S-based companies—those that maintain their primary business affairs in the U.S.—are a major component of many global sectors and industries.

Here’s how it breaks down:

Sector	% of U.S.-based Companies	Most U.S.-heavy Subsector
Information technology	73%	Software (86%)
Health care	65%	Health care providers (82%)
Utilities	53%	Electric utilities (57%)
Real estate	51%	Equity REITs (69%)
Consumer discretionary	49%	Specialty retail (73%)
Consumer staples	46%	Household products (74%)
Industrials	46%	Aerospace & defense (73%)
Energy	44%	Energy - other (73%)
Financials	44%	Financials - other (73%)
Materials	30%	Chemicals (41%)

U.S.-based companies make up a staggering 73% of the information technology (IT) sector. However, China may soon threaten this dominance. The Made in China 2025 plan highlights new-generation IT as a priority sector for the country.

The U.S. is still the world’s leader, but China is coming up very fast.

—Rebecca Fannin, Journalist & Author of Tech Titans of China

Healthcare is also heavily skewed towards U.S-based stocks, which make up 65% of the sector’s market capitalization. This weighting is perhaps not surprising given the success of many U.S. healthcare companies. In Fortune’s list of the 500 most profitable U.S. companies, 41 healthcare organizations made the cut.

The materials sector has the smallest weighting of U.S.-based stocks, but they still account for almost one-third of the overall market capitalization. Three American companies are in the sector’s top 10 holdings: Air Products & Chemicals, Ecolab, and Sherwin-Williams.

U.S. Equity Views in a Global Context

Given the high weighting of U.S. stocks in global sectors and industries, having a U.S. view is important. This refers to investors gaining a clear perspective on the risks and opportunities that exist in the country. Investors can consider the trends influencing American companies in order to help explain stock performance.

U.S. stock dominance also impacts geographic diversification. While it helps non-U.S. investors overcome their home bias, American investors may want to consider targeting specific international markets for well-rounded exposure.

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Technology

Just 20 Stocks Have Driven S&P 500 Returns So Far in 2023

From Apple to NVIDIA, megacap stocks are fueling S&P 500 returns. The majority of these firms are also investing heavily in AI.

Creator Program

Published

4 days ago

May 24, 2023

Dorothy Neufeld

Just 20 Stocks Have Driven Most of S&P 500 Returns

Just 20 firms—mainly AI-related stocks—are propping up the S&P 500 and driving it into positive territory, signaling growing risk in the market.

The above graphic from Truman Du shows which stocks are making up the vast majority of S&P 500 returns amid AI market euphoria and broader market headwinds.

Big Tech Stock Rally

Tech and AI stocks have soared as ChatGPT became a household name in 2023.

The below table shows data from last month, highlighting that just a small collection of companies drove most of the action on the U.S. benchmark index.

Company Rank	Name	Contribution to S&P 500 Return	Average Weight
1	Apple	1.49%	6.61%
2	Microsoft	1.15%	5.72%
3	NVIDIA	1.00%	1.62%
4	Meta	0.66%	1.15%
5	Amazon	0.51%	2.56%
6	Tesla	0.50%	1.39%
7	Alphabet (Class A Shares)	0.34%	1.72%
8	Alphabet (Class C Shares)	0.31%	1.53%
9	Salesforce	0.19%	0.51%
10	Advanced Micro Devices	0.16%	0.39%
11	General Electric	0.10%	0.28%
12	Visa	0.10%	1.08%
13	Broadcom	0.09%	0.73%
14	Intel	0.09%	0.35%
15	Walt Disney	0.08%	0.55%
16	Booking Holdings	0.07%	0.28%
17	Exxon Mobil	0.06%	1.37%
18	Netflix	0.06%	0.44%
19	Oracle	0.06%	0.40%
20	Adobe	0.06%	0.49%
	Top 20 Companies	7.05%	29.17%
	S&P 500*	7.55%	100.00%

*Based on the Vanguard S&P 500 ETF as of April 11, 2023. Source: Vanguard S&P500 ETF, Bloomberg.

Microsoft invested $10 billion into OpenAI, the creators of ChatGPT. It has also integrated generative AI into its search engine Bing. This large language model is designed specifically to make search capabilities faster, generate text, and perform other automations.

Also of interest is NVIDIA, which is the most valuable chipmaker in America. It sells $10,000 chips called A100s that allow machine learning models to run. These models perform multiple tasks simultaneously to develop neural networks and train AI systems, including OpenAI’s ChatGPT. Companies that are developing AI-related services, such as chatbots or image generation, may use up to thousands of these chips.

Despite being the world’s most valuable company and a key driver of returns, Apple is an outlier among tech giants with no major projects announced in AI (so far).

Implications of Market Divergence

The problem with the strong gains seen in a few select AI-related stocks is that it clouds wider stock market performance.

Without the AI-led rally, the S&P 500 would be returning -1.4%. as of May 17, 2023.

4. AI is fueling the stock market

A handful of stocks are spearheading the S&P 500's impressive 9% rally this year.

Here’s the kicker: if you excluded AI stocks, the S&P 500 would be down over 1% (according to Societe Generale). pic.twitter.com/SME1mJVpoW

— Rowan Cheung (@rowancheung) May 22, 2023

This form of steep divergence, known as market breadth, often signals higher risk in the market.

When more companies experience positive returns it is less risky than a small handful seeing the majority of the gains. Today market breadth is very narrow, and these companies make up over 29% of the entire index’s market capitalization.

How long AI-related firms mask the broader performance of the S&P 500 remains to be seen. A growing number of market pressures, from higher interest rates to banking uncertainty could add further challenges.