☕️ That “Record” Concentration Chart on X? Here’s What It Doesn’t Tell You
Oct 15, 2026Howdy! 👋
There’s a chart flying around X lately that’s got a lot of folks fluttering toward the sell button like moths drawn to a porch light on a hot summer night.
You’ve probably seen it.
Six colorful squiggles. Six red circles. Railroads, the Nifty Fifty, Japan, the dot-com bubble… and today’s “AI Big 10” sitting at a “record” 42% of US stock market cap.
The chart… and all the X posts talking about it… never actually says “sell.”
It doesn’t have to.
Red circles at the top of every bubble in history, and then a green line climbing right up into the danger zone?
The message practically writes itself.
The chart comes from Bank of America, and – to be clear – I’ve got no quarrel with the data driving it. Some pretty smart people made the connections.
My beef is with how it’s being used.
Charts don’t think.
Investors do… or at least they should.
Let’s break it down.
1 – Start With the Word “Peak”
One X post calls 42% a record.
Then, three sentences later, it tells you railroads hit 63%.
That’s a lot like recording a golf score depending on which holes you count. 😆
Another says railroads peaked “in the 1900s”, but BofA’s research puts that peak in 1881.
Small thing?
Maybe.
My caution is that if the folks posting charts like this one can’t read the dates, I’d be careful about trusting ’em with the conclusions they’re offering. Let alone your money.
Another post says markets “more than doubled since the 2022 bear market low” – the implication is to sell now and wait to buy in at lower prices.
Naturally.
Measure anything from the bottom of a bear market, and the move looks spectacular. Start the clock at the lowest point you can find, and doubling becomes a lot easier to pull off.
None of this means the chart is wrong… just that the posts related to it are written like a lot of other social media these days… to elicit a specific reaction by playing to your emotions.
Mission accomplished, apparently.
Keith’s Investing Tip: Urgency is almost always somebody else’s agenda.
2 – Apples, Oranges and a Tesla
Always read the fine print.
Six lines, and almost none of ’em measure the same thing.
Railroads are a single sector. “Utilities/telco/industrials” mashes three sectors together. The Nifty Fifty was a basket of roughly 50 stocks. TMT lumps tech, media and telecom into one bucket.
Japan isn’t even a US number. It’s an entire country’s share of the global MSCI ACWI index. Different market, different denominator, same chart.
And the “AI Big 10” is a hand-picked list: the Magnificent 7 plus Broadcom, AMD and Micron. Then there’s Amazon, which still sells an awful lot of paper towels, yet is counted as “AI.” And don’t even get me started on Tesla, which now is so vertically integrated and impacting so many industries that it defies categorization as simply “AI”.
In other words, you’ve got sectors, groups of sectors, a 50-stock basket, a whole country measured against the world, and 10 analyst-selected companies. All plotted side by side as if they were the same animal.
Now look at the bottom axis.
It jumps from 1835 to 1920, breaks, picks up at 1972, breaks again, skips to 1985, then 1999, then 2023. Eighty-five years of railroad history get the same width on the page as seven years of AI. Each line is conveniently shown only in a window around its own peak.
And here’s the subtle part. Every episode on this chart was labeled a “bubble” after the fact, because it ended badly. Pick only the stories with bad endings, line up their peaks, and naturally every peak looks like a warning.
Keith’s Investing Tip: Before you believe a chart, read the footnotes and the axis. That’s usually where the real story hides.
3 – What Happened After the Red Circles
The post wants you to look at the peaks when the real lessons are almost always in what comes next. The markets are forward-looking.
Railroads. The tallest peak on the chart, 63%. Railroads went on to shrink from 63% of the US market to less than 1% today. Yet, according to research highlighted by UBS, railroad stocks have outperformed both the US market and newer technology competitors since 1900.
Read that again.
The scariest red circle on the page beat the market for more than a century.
TMT. The dot-com crash was brutal. I lived through it and invested through it, and I’ve got the scars to show for it. Yet that same UBS research found the tech industry behind the bubble went on to outperform the market even after the bubble burst.
Japan. I’ve spent a big chunk of my life in Japan, and I can tell you from personal experience that the Japan of 1989 was a different universe. The Nikkei traded around 60 times earnings, roughly four times the long-run global average. At the peak, the land under the Imperial Palace was estimated to be worth more than all the real estate in California. Then the Bank of Japan hiked rates from 2.5% to 6%, and the Nikkei lost about 60% by 1992. It didn’t reclaim its 1989 high until 2024… 34 frustrating years later. Yet, specific Japanese companies outperformed wildly. Names like Zensho, Lasertec, Fast Retailing and Keyence rose tenfold or more while the index went nowhere.
Today. The S&P 500’s top 10 trade at about 26 times earnings. That’s expensive by historical standards, and I won’t pretend otherwise, but it’s also a fraction of what Japan was trading at back in the day. Those same top 10 contribute just over one-third of all S&P 500 earnings, and J.P. Morgan notes earnings concentration has moved in lockstep with market cap concentration for the past decade.
Remember something that you hear me say quite often... prices follow profits.
The relationship isn’t always immediate, but history shows this very clearly over time, which is why when those two things “divorce” at moments in time, history also shows tremendous opportunity.
What you want to think about is that many of those companies got “big” and concentration grew because they were making enormous amounts of money.
Different setups.
Different valuations.
Different outcomes.
One red circle apiece.
Keith’s Investing Tip: A peak tells you where something stopped. It never tells you why or what happens next. Smart investors always ask why and what’s to come because the markets are forward-looking and so is the profit potential that comes with that concept.
4 – Follow the Money… Literally
If you want something to actually worry about, look past the red circles and ask what popped each bubble.
Japan? The Bank of Japan jacked up rates.
The railroads? BofA’s own team notes that boom happened while Treasury yields were falling and ended amid credit and liquidity crises.
The 1973–74 bear market? An oil embargo, the collapse of Bretton Woods and stagflation.
See the pattern?
Concentration was along for the ride, but money, credit and leverage did the driving or the diving every single time.
That’s why I keep hammering on the bond market; I submit it’s been doing the Fed’s job for some time now.
I find it interesting that Michael Hartnett, the BofA strategist behind this chart, flags rising Treasury yields as the real risk today – which I don’t necessarily agree with for reasons I’ve talked about many times – even as his team also lays out a bull case that AI capital spending runs about 3.5% to 4% of GDP, still substantially below the roughly 5% peak of the railroad era.
Funny how that part didn’t make it into various X posts related to this chart.
To be clear, I’m not going to sit here and tell you there’s zero risk because that would be its own kind of bunk and I don’t roll like that. Every investment has risks, but not all risks are worth the investment.
Keith’s Investing Tip: Rallies don’t die of old age. The Fed tends to kill ‘em, not concentration.
5 – Think Before You Flutter
Here’s the thing about moths. They fly toward the light because it’s bright, and they never stop to ask whether it’s the moon or a bug zapper. 🦋⚡
Don’t be the moth.
- The markets are growing more concentrated because the world is reorganizing itself in ways that don’t respect Wall Street’s tired old categories any more than they reflect the manufacturing economy of 120 years ago.
- Concentration will continue to accelerate as technology redefines the world around us while also causing massive structural changes capable of powering markets for decades to come.
- Profit potential is accelerating, particularly when it comes to companies making “must-have” products and services the world can’t live without. Nice-to-haves are going to fall by the wayside.
- Volatility is a travelling companion and an opportunity creator, not the wealth destroyer so many mistakenly think it is. That’s why you want to have a “buy” list ready at all times.
Keith’s Investing Tip: Plan for corrections. Buy the best, ignore the rest!® for the simple reason that quality matters.
Bottom Line
Keep it stupid simple.
People are so busy trying to predict the unpredictable that they forget to think about the profitable.
You got this – I promise!
Now and as always, let’s MAKE it a great day.
Keith 😀
