In December 2024, amid challenges in the U.S. stock market, shares of major technology companies termed the “BATMMAAN” stocks have demonstrated resilience. This group includes Broadcom Inc. (AVGO), Nvidia Corp. (NVDA), Tesla Inc. (TSLA), Amazon.com Inc. (AMZN), Microsoft Corp. (MSFT), Meta Platforms Inc. (META), Apple Inc. (AAPL), and Alphabet Inc. (GOOGL).
BATMMAAN stocks show resilience amid market challenges
The combined market capitalization of these eight companies has increased by more than $1.9 trillion since President-elect Donald Trump’s electoral victory on November 5, 2024, equating to over 85% of the total increase in the S&P 500’s market capitalization during that period, according to Dow Jones Market Data.
Following Trump’s election, the stock market initially experienced a broad-based rally, with financial and small-cap stocks climbing alongside the megacaps. However, from the beginning of December, other sectors have seen diminished gains. As of the final two trading days of the year, only three of the S&P 500’s 11 sectors—information technology, consumer discretionary, and communication services—were in positive territory, and each BATMMAAN stock is part of these sectors.
Despite the S&P 500 index heading toward a monthly loss, the Nasdaq Composite, heavily weighted with big tech stocks, was up approximately 2.5% as of the last close, according to FactSet data. The Dow Jones Industrial Average has experienced its longest losing streak since the mid-1970s.
The S&P 500 faced its longest duration of negative breadth since at least the end of 1999, with more constituents falling than rising on a daily basis. George Cipolloni, a portfolio manager at Penn Mutual Asset Management, told MarketWatch that after a temporary expansion following the election, the market returned to a hyper-concentrated state with a heavy reliance on a few stocks.
According to Apollo’s Torsten Slok, this concentration is significant, with five S&P 500 stocks holding a weight of at least 3% of the index, the highest level since the early 1990s. These stocks are Apple (7.2%), Nvidia (6.3%), Microsoft (6%), Alphabet (4.4%), and Amazon (4.4%).
Supporters of these megacap stocks argue they merit high valuations, particularly Nvidia and Broadcom, which have shown strong earnings growth over the past two years. However, stocks like Apple and Tesla are not keeping pace with earnings growth, indicating potential vulnerability in upcoming quarters if results fail to meet investor expectations.
Concerns arise about the S&P 500’s diminishing diversification opportunities, as stated by Slok. Cipolloni remarked, “When you put all of your eggs in one basket, you’ve got to watch that basket.”
Market growth expectations for 2025
Despite recent fluctuations, market gains in 2024 have been more evenly distributed than in 2023, with 10 of the S&P 500’s 11 sectors projected to finish the year higher, according to FactSet data. Small and mid-cap stocks are also experiencing stronger gains, though they lag behind large-cap counterparts.
The S&P 500 is poised for a notable achievement, as it approaches its first total return greater than 25% for two consecutive years, the first occurrence since 1998. Wall Street anticipates that the rally will persist into 2025, although at a more tempered rate.
Looking forward, earnings growth for companies outside the megacap category has been stagnant for the past two years, but analysts predict significant growth for the remaining 493 companies in the S&P 500 in 2025. Nonetheless, rising Treasury yields could temper investor enthusiasm for this earnings growth. The yield on the 10-year Treasury note has risen roughly 100 basis points since the Federal Reserve’s interest rate cut in September, reaching levels not seen since early May.
Investors may also reassess whether the advancements in artificial intelligence justify the elevated valuations of some companies. So far, AI-related investments have led to substantial earnings growth for Nvidia; however, many AI innovations have yet to translate into profits for other sectors. Burns McKinney, a portfolio manager at NFJ Investment Group, told MarketWatch that investors could start to insist on concrete evidence of returns from AI investments in the coming year.
Even with potential challenges from the AI sector, experts largely expect this won’t lead to widespread losses in the market. McKinney noted that the supportive policy environment under the Federal Reserve and Trump’s anticipated tax cuts and deregulation initiatives could reinforce market growth in 2025.
There is limited activity on the U.S. economic calendar for the upcoming week as the New Year approaches, though readings on weekly initial jobless claims and ISM manufacturing sector activity could be of interest. Despite finishing lower on Friday, indices including the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average recorded gains for the week, according to FactSet data.
BATMMAAN stocks dominate, but don’t get caught up in the hype without thinking critically. These companies are at the top for a reason—cutting-edge tech, massive scale, and market influence. But here’s the catch: this level of concentration in your portfolio can be risky. Sure, Nvidia’s AI and Broadcom’s growth are impressive, but are Tesla or Apple keeping up with their valuations? Not quite. Diversification is key, and relying too much on a handful of giants can leave you exposed. Remember, when everyone piles into the same trade, the margin for error gets razor-thin.
Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.
Featured image credit: Kerem Gülen/Ideogram
