The market has been split cleanly in two, with the dividing line running straight through the technology sector. Charles Dickens’ famous line gets reordered this year, with the “worst of times” coming first, as the S&P 500 fell roughly 4.5% in the first quarter before climbing a staggering 19.5% since the start of the second quarter. Technology tells a sharper version of the same story as the sector was down about 7.5% in the first quarter and up near 50% since April 1, 2026, the start of the second quarter. The gyrations have been extraordinary. Strip technology out of the benchmark performance and the contrast between the two quarters largely disappears.

A Rally Built on Chips

The “best of times,” however, may be premature, as a closer look reveals what is fueling the rally. Companies are spending enormous sums to build datacenters and buy chips related to artificial intelligence. Spending on chips is tangible and the revenue is already showing up at the firms that supply these specialized chips. What gives us pause is the pace. Gains of this size, compressed into a couple of months, tend to reflect speculative buying (investors paying today for profits they expect to see later). This type of stock movement implies that investors expect more than the earnings these companies have already delivered, they expect exponential growth to continue and expand.

What stands out is how little company fundamentals seem to be driving price movement. Valuation as an investment metric has largely stopped in the US and overseas. Technical and momentum signals have taken the lead. Growth expectations have barely changed, even as stock prices have changed significantly. The market is increasingly trading on the momentum of price movement rather than on what a company and stock is actually worth. When price dislocates from fundamentals in this way, gains can reverse as quickly and usually even faster than they moved up. The Pave scoring engine puts numbers behind the concentration: across the more than twenty thousand securities, the semiconductor and AI-hardware complex (over seven hundred names) sits at the top of our rankings, with memory chipmakers being the single highest-scoring group. Moves like this have historically accompanied the early, euphoric stage of a cycle, a pattern most often associated with bubbles.

Narrow, and Narrowing

The concentration itself is worth watching and the strength is narrower than the headline suggests. Most of this year’s advance has come from a small group of very large technology names, which means the headline index now rises and falls largely on how those few stocks trade. Even inside the technology complex, it is the chip and hardware stocks doing the work. The Pave scoring engine ranks the semiconductor and hardware group near the top while software and IT-services companies sit roughly at the midpoint. This gap holds across both US and international stocks.

The tech rally, in other words, is largely a chip rally. A market leaning this heavily on one slice of one sector leaves the index hostage to a handful of names, which makes it more fragile than a broad market advance.

What the Concentration Leaves Behind

The same weekly rankings show the other side of the ledger. Consumer-facing sectors (retailers, household-goods, and everyday services that depend on household spending) sit near the bottom alongside much of healthcare. Again, holding true across both US and international names. When capital crowds into one corner of the market at this pace, the effects rarely stay contained. Money flowing into a handful of AI winners is money not reaching the broad consumer economy, with likely knock-on effects for both.

As the headlines focus on the rising index and new highs, many companies outside technology are reading flat or lower even as the S&P 500 sets new highs. It is difficult to have winners on this scale without a fair number of losers in other parts of the market, and those losses are easy to overlook when the index itself looks healthy.

Our view is straightforward. A market this concentrated, and this dependent on momentum rather than fundamentals, leaves little margin for error. Volatility looks more likely to rise than fall from here, and environments like this tend not to last.

‍

By Stephen Evans

‍

Risk Disclosure & Disclaimer

Copyright © 2026 Pave Finance, Inc., LLC and Stephen Evans. All rights reserved. 

The attached material is provided in partnership with Pave Investment Advisers, LLC (“Pave”), and is the opinion of Pave and Pave’s Chief Investment Officer, Stephen Evans. Distribution is being provided through a licensing agreement, and any further dissemination is strictly prohibited.

You can update your preferences or unsubscribe from this list.

For Financial Professional Use Only

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. There is no guarantee any investment recommendations will be successful and there is a risk of losing money.

We take protecting your data and privacy very seriously. Please see our privacy policy here.

Pave Investment Advisors, LLC is an SEC Registered Investment Advisor. Such registration does not imply any level of expertise.

Securities offered through Pave Securities, LLC – New York, NY. Member FINRA/SIPC. You can review Pave Securities LLC with FINRA’s BrokerCheck BrokerCheck.

Advisory Services are only offered through Pave Investment Advisors, LLC., an SEC Registered Investment Advisor which is an affiliate of Pave Securities, LLC.

Pave Securities, LLC and Pave Investment Advisors, LLC do not offer tax or legal advice.

The news, resources and articles available on this site are being presented for educational purposes only and should not be considered specific investment or planning advice applicable to each individual.

Please see ADV Part 2A here and Form CRS here.