Within the past few weeks, Apple joined Nvidia as just the second company in history to eclipse a $5 trillion valuation.

Milestones like this always spark the same debate:

The market is too concentrated... a handful of companies are too dominant... trouble must be right around the corner.

Maybe.

But before reacting, it's worth asking two better questions:

1. How much bigger can these companies actually get?
2. And does the answer even matter for your retirement?

In today's email, I'm tackling both with a little help from Warren Buffett and some eye-opening math.

As always, I'll wrap up with a few of the best retirement and investing articles I read in the past week.

***

Before we dive in, did you catch this week's podcast? 👇

These Are Not Normal Companies

In 2024, Apple's AirPods alone generated more than $18 billion in revenue.

That's more than the total revenue of Spotify, Nintendo, eBay, or Airbnb.

One small accessory... bigger than entire household-name companies. 🤯

Their stock moves are just as staggering.

Shortly after crossing the $5 trillion mark, Apple's stock dipped roughly 10%, erasing more than $500 billion of market value.

That single decline was larger than the entire market value of Costco, the 32nd largest publicly traded company in the world.

The Concentration Worry Isn't New

If today's headlines about market concentration feel familiar, that's because they are.

Back in 2018, investors and media outlets warned that the technology sector was approaching levels last seen near the height of the tech bubble.

At the time, Apple was on the verge of becoming the first $1 trillion company.

Since those warnings?

The number of trillion-dollar companies worldwide has grown to fifteen, and the stock market has nearly tripled.

To be fair, the market really is more concentrated today.

According to J.P. Morgan, the 10 largest stocks now make up nearly 40% of the entire S&P 500, roughly double their long-term historical average.

So, yes, the observation is legitimate.

But history shows these worries can persist for years, even decades, while markets keep climbing.

How Much Bigger Can They Get?

Nobody knows for sure, but Warren Buffett once offered a useful lens:

The logic is simple.

There are only so many products and markets large enough to meaningfully move the needle for a $5 trillion company.

For example, if a $5 trillion company grew 10% per year (the market's long-term historical average), it would be worth $33 trillion within 20 years.

You can decide whether that seems plausible, but at some point, Buffett is probably right.

What This Means for Your Retirement

Here's the good news: you don't need to answer the $5 trillion question to retire successfully!

What you do need to recognize is that concentration risk is real, especially when you're in or nearing retirement.

Having too much of your portfolio tied to a handful of dominant companies can leave you more exposed than you realize.

And once you're withdrawing from your portfolio instead of adding to it, a concentrated bet gone wrong doesn't just hurt your account balance, it can threaten the income your retirement depends on.

That makes prudent diversification across company size, sector, and geography especially important.

It frees you from needing to predict how much larger today's winners can grow:

• If the winners keep winning, you benefit (you own them)
• If leadership rotates, you benefit (you own the next winners, too)

Instead of betting that a few businesses will dominate forever — or that their run must end soon — a diversified portfolio is a broader bet on the continued progress and wealth creation of the global economy.

Bottom Line

So, how big can these companies get?

It's a fascinating question that makes for great headlines, but a well-built retirement plan doesn't need the answer.

By staying properly diversified, you're trusting that a rising tide will keep lifting many boats without needing to know, in advance, which boats will rise the fastest.

📚 What I've Been Reading

• How to Earn a Billion Dollars (Paul Graham)
• Ranked: The Countries Creating the Most New Millionaires (Visual Capitalist)
• 3 Brilliant Quotes on the Challenge of Valuing Companies (Sam Ro)
• The Brain Glitch That Makes Modern Life Feel Miserable (Two Percent)
• Chasing Life Goals Is a Recipe for Disaster — Try These Experiments Instead (The Guardian)​

Thank you for reading!

Please reply to this email with comments, questions, and/or feedback.

Stay wealthy,

Taylor Schulte, CFP®