Has Big Tech Become Too Big?

Call it concentration if you like, but I call it progress.

There’s been no shortage of headlines about market concentration lately. Apparently, market portfolios are “too reliant on the US” or “too dominated by the Magnificent 7.” Both claims I actually enjoy debating, mainly because I find those groups to contain some of the most disruptive, attractive, and flat-out unbeatable companies on the planet. Today, I want to poke at a claim that isn’t getting nearly enough airtime: Tech is too big.

Now, before we start throwing stones at “Big Tech,” we need to rewind a bit. Where did these sector definitions even come from? Back in 1999, MSCI and Standard & Poor’s decided the world needed a tidy filing cabinet for companies, so they came up with the Global Industry Classification Standard (GICS). Each company gets shoved into one “primary sector,” usually based on its biggest source of revenue. Sensible enough on paper, but in practice, it creates some rather bizarre results when applied to modern businesses that don’t fit neatly into one box.

Take the S&P 500 as an example. It represents the 500 largest companies in the US and makes up roughly half of the world’s equity market capitalisation. Within it, about 35% is made up of what the index calls Technology stocks, or more formally, Information Technology, as seen in the table below. That is already a chunky slice of the pie.

Source: Timeline Portfolios, data obtained via Morningstar API. Sector allocations as of 12 September 2025

Looking at the table above, it is hard to ignore just how dominant Technology appears compared with the other sectors. At more than a third of the index, it is larger than Financials, Healthcare and Industrials combined. On the surface, that alone feels like heavy concentration. But the story gets even more interesting. Thanks to the quirks of the GICS system, some of the companies we instinctively see as tech leaders are not even counted in that 35%.

Take Amazon. Most of its revenue still comes from retail, so it is filed under Consumer Discretionary (also commonly referred to as Consumer Cyclical) rather than Technology. Alphabet, better known to most of us as Google, earns the bulk of its money from advertising, so it sits in Communication Services. Meta, the parent of Facebook and Instagram, is also lumped into Communication Services for the same reason. And then there is Tesla, which, despite being one of the most disruptive tech-driven companies in the world, is officially just another carmaker in Consumer Discretionary.

And that is the oddity. If you stopped someone in the street and asked them to name the world’s most famous tech stocks, Amazon, Alphabet, Meta, and Tesla would almost certainly make the list. Yet by the official sector rulebook, none of them are classified as technology.

Now add those “tech-like” companies to the official IT sector, and the picture changes dramatically. Amazon (4.12%), Alphabet (3.76%), Meta (3.13%), and Tesla (1.61%) together push the total exposure to technology-driven businesses in the S&P 500 up to 47.6%. That is nearly half the index tied up in one broad theme, which at first glance looks like a serious concentration risk.

Source: Timeline Portfolios, data obtained via Morningstar API. Sector allocations as of 12 September 2025

At this point, it is easy to see why people raise the alarm. The top names dominate the index, and once you reclassify the so-called “non-tech” giants alongside the official IT sector, the weight looks even heavier. On paper, that sounds like trouble. But here is where I would argue the fear is overblown.

So why am I not worried? Two reasons.

First, technology is probably the most diverse “sector” you can find when it comes to revenue engines. Apple makes money from devices and services. Microsoft is built on enterprise software and the cloud. Nvidia thrives on semiconductors. Alphabet lives off ads. Amazon combines e-commerce with AWS. Tesla is cars and batteries. They may all be technology-driven businesses, but the way they generate profits could not be more different.

Second, what even counts as “tech” anymore? In 2025, almost everything should. To succeed, every business has to embrace technology in some shape or form. Take the UK’s most famous challenger banks, Revolut and Monzo. Officially, they sit in Financials, yet they are some of the most innovative tech-driven businesses in the country. Ocado may be classified as a supermarket, but it is just as much a robotics company. John Deere, technically an Industrial, now makes tractors that are software-heavy, GPS-guided platforms. Even pharmaceuticals are increasingly biotech. And the same story plays out across financial advice. Asset management and planning are no longer about spreadsheets, linear assumptions and quarterly statements. They are being redefined by fintech platforms such as Timeline, which streamline the entire process from financial planning to investment management and custody. The result is advisers who can work more efficiently, deliver deeper insights and create a smoother experience for their clients.

The point is simple: technology is no longer a sector; it is the infrastructure of modern business.

Almost every market leader today is, in one way or another, a tech company. The winners across banking, energy, retail and beyond are the ones that adopted technology fastest. To make the point, let’s look across the sectors. Pick any industry you like, and the leader in that space has leaned on technology to cement its position. From Apple in IT to JPMorgan in finance to Prologis in real estate, the common thread is not the sector label; it is how they use tech to win. The table below gives you a flavour of it.

So what does all this tell us?

On the surface, the numbers look scary. If you take the S&P’s 35% in IT and then add another 12% from the so-called “non-IT tech” names, you end up with almost half the index tied to one broad theme. That sounds like concentration risk. But the reality is that tech is not a single sector. It is the thread running through every industry, the common denominator behind disruption and growth.

So the more interesting question is not whether tech is too big. It is whether any company can realistically be a market leader today without being, in some form, a tech company?