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FollowingThe three major chip manufacturers are likely responsible for approximately 40% of the profit growth in the S&P 500 index.
Nvidia, Broadcom, and Micron Technology are expected to account for nearly 40% of the profit growth in the S&P 500 index in the third quarter. This indicates how much the U.S. stock market relies on a few semiconductor companies that benefit from investments in artificial intelligence. According to data provided by Goldman Sachs, as semiconductor stocks have performed poorly recently and government bond yields have risen, the S&P 500 index remains close to historical highs.
According to FactSet’s October earnings forecasts, profits of the S&P 500 index are expected to increase by approximately 29.6% in the third quarter compared to last year. Historical data shows that actual growth could exceed 35%.
AI chip giants drive index growth
This concentration is particularly noteworthy, as the S&P 500 index includes around 500 companies from various industries such as financial services, healthcare, energy, manufacturing, and technology. However, Nvidia, Micron, and Broadcom are expected to contribute nearly two-thirds of the index’s profit growth, reflecting their high reliance on AI infrastructure spending.
Nvidia benefits from the demand for AI accelerators, Micron provides necessary high-bandwidth memory for advanced computing systems, while Broadcom offers customized AI processors and network technologies for large data centers. It’s important to note that these profit contributions refer to the increase in total profits compared to a year ago, not the proportion of the S&P 500 index’s total profits attributable to these three companies.
These data illustrate why AI companies can continue to support broader increases in the S&P 500 index, even when borrowing costs remain at historically high levels. However, this also raises concerns: to what extent the profitability of the market depends on a few select semiconductor suppliers.
Nvidia, Broadcom, and Micron’s stock prices declined, with Broadcom’s CEO questioning the returns on AI investments.
The profitability prospects contrast sharply with the recent performance of semiconductor stocks. On October 13th, the Philadelphia Semiconductor Index fell for the fifth consecutive day. Applied Materials’ stock price dropped by approximately 6.7% after the company announced plans to build a $5 billion advanced research center in Silicon Valley.
This weakness indicates that investors are becoming more cautious about AI infrastructure spending, especially when large-scale projects require significant upfront investments. At a conference in Singapore, Broadcom CEO Hock Tan discussed whether many enterprise AI clients have gained meaningful returns from their investments.
His remarks are noteworthy, as Broadcom itself is a major provider of AI infrastructure services and therefore a direct beneficiary of this spending trend. This pullback occurred after NASDAQ showed strong performance earlier in the month, as strong semiconductor earnings helped to offset the pressure caused by bond yields exceeding 5%.
Without the support of AI-related stocks, can the S&P 500 maintain its upward trend?
The broader market remains vulnerable to changes in semiconductor earnings expectations. According to Reuters, although the S&P 500 index rose by approximately 14%, more than 40% of the S&P 500 components still experienced declines in 2026. This highlights the gap between the overall performance of the index and that of individual stocks.
Meanwhile, inflation in the United States reached 3.7% in September, increasing the risk of further policy tightening by the Federal Reserve, which put additional pressure on the valuation of tech stocks. Higher interest rates make future corporate profits less valuable in terms of present value. This means that even companies with strong earnings reports may find it difficult to maintain high valuations.
This tension is evident in the recent “AI stock divergence” phenomenon: the strength of tech stocks masks the weakness of other sectors.
