S&P 500’s record highs come with a price

The S&P 500 has climbed to record highs this year, but the surge means stocks are pricier than ever. Investors are now paying more than ever for each dollar of revenue the index generates.

Last week, the S&P 500 traded at 3.23 times sales, the highest level on record.

Its price-to-earnings ratio also looks stretched at 22.5 times projected earnings for the next 12 months, compared with an average of 16.8 since 2000.

Tech giants dominate the market
Tech giants like Nvidia and Microsoft continue to drive growth, helping the 10 largest companies in the index capture nearly 40% of its total value, the highest share ever. 

Yet, analysts warn that such concentration makes the market more vulnerable to shocks. In April, tariff plans triggered a selloff that hit big tech harder than the broader index.

Opportunities beyond megacaps
Not all stocks look pricey. Value-focused investors see opportunities in smaller companies trading at more modest levels, especially those that could benefit from AI without sky-high valuations.