US Growth Stocks: Semiconductor Surge Redraws the Risk Map

The Russell index rebalance has shifted concentration from the Magnificent Seven to semiconductors, not eliminated it. Semis now represent a third of the Russell 1000 Growth Index and nearly half its market risk. This concentrated exposure, particularly in memory stocks, proved volatile in July.

This change means passive investors hold a benchmark with increased sensitivity to market swings. The article suggests this shift amplifies concentration risk, especially if AI capital expenditures don't translate to profits or demand falters. Investors should focus on broad diversification across sectors.

The article flags uncertainty about sustained chip demand. It also notes that active management has historically performed well when extreme concentration unwinds. The case for diversification remains strong despite benchmark changes.