Has the AI Rally Made S&P 500 ETFs Too Risky? What Investors Need to Know

The question of whether the AI rally has made S&P 500 ETFs too risky centers on market performance and rising concentration and valuation concerns. The S&P 500 is cited as returning 24%, 23%, and 16% over the past three years, with an additional 10% gain this year, which would support the prospect of four consecutive calendar years with double-digit returns. The article warns that valuation and concentration risks could increase downside exposure if conditions change, citing the Shiller CAPE ratio at 42, near levels seen once before in the run-up to the 2000 tech bubble. It also notes tech accounts for about 40% of the index, while the top 10 holdings make up nearly 40%. As a potential mitigation, it highlights the Invesco S&P 500 Equal Weight ETF (RSP), citing a forward P/E around 17 and broader sector weightings. The piece does not present new trading instructions beyond discussing risk factors.