For years, investors have watched a small group of mega-cap companies drive much of the S&P 500’s performance.
The Magnificent Seven — Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, and Tesla — accounted for the bulk of the index’s gains, and investors saw little reason to bet against them.
However, that trade stalled in 2026, and the equal-weight version of the S&P 500, which gives every company the same influence regardless of size, is now leading
As of early August, the Invesco S&P 500 Equal Weight ETF (RSP) had returned 13.1% year to date, compared with about 10% for the cap-weighted Vanguard S&P 500 ETF (VOO), according to Benzinga.
RSP surpassed $100 billion in assets under management for the first time in August, after attracting more than $12 billion in net inflows in 2026, CNBC reported.
That milestone marks the clearest sign yet that investors are repositioning beyond mega-cap dominance.
The Magnificent 7 stall in 2026
Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, and Tesla collectively lost 1.9% in the first half of 2026, while the broader index gained 9.3%, Bloomberg reported.
That gap reflects a broadening of market leadership beyond the Magnificent Seven, while performance within the group has also diverged sharply. Microsoft was down 18.64% year to date as of July 16, while Apple was up 20.70%.
Tesla was down 14.15% year to date as of July 16, while rival BYD delivered 557,090 battery-electric vehicles in the second quarter and reclaimed the global BEV sales lead, according to Investing.com.
Related: Bank of America spots new curveball for Magnificent Seven stocks
The four major hyperscalers, Microsoft, Alphabet, Meta, and Amazon, are now projected to spend a combined $725 billion on AI infrastructure in 2026, up from earlier estimates of $670 billion, according to Financial Times analysis of the companies’ earnings-call guidance.
Brent Thill, a technology equity analyst at Jefferies, called it a “show me” phase, investors want to see that spending translate into profits.
The Magnificent Seven are projected to post 22.8% earnings growth in the fourth quarter of 2026, trailing the 25.3% expected from the other 493 S&P 500 companies, according to FactSet.
The Magnificent Seven traded at about 25.8 times forward earnings in February, compared with 21.8 times for the S&P 500, according to Yardeni Research.
That underperformance carries added weight because the market entered 2026 unusually concentrated: the 10 largest S&P 500 companies accounted for nearly 40% of the index by mid-2025, a level not seen since the mid-1960s, according to S&P Dow Jones Indices.
What equal-weight exposure costs over 5 and 10 years
RSP holds the same 500-plus stocks as the standard S&P 500, but weights them equally. Technology drops from 38% of the cap-weighted index to 16%, while industrials and financials each rise to about 15%, according to Invesco’s RSP product page.
The rebalancing needed to maintain equal weight creates turnover, transaction costs, and taxable capital gains every quarter.
Erich Pingel, Vanguard analyst, says markets evolve alongside broader economic change.
“The market’s shifting composition is a feature, not a flaw … As industries rise and fall, investors adapt, causing the market to continuously reflect the structure of the economy,” Pingel said.
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The fund held roughly 4% in cash as of April 2026, a drag that doesn’t appear in the 0.20% expense ratio, Yahoo Finance reported.
Over the five years ended March 31, 2026, VOO returned about 76% cumulatively versus roughly 47% for RSP.
Over 10 years, a $10,000 investment with distributions reinvested would have grown to about $37,460 in VOO, based on Vanguard’s 10-year performance data, versus roughly $28,940 in RSP, based on Invesco’s 10-year performance data, a difference of about $8,520.
RSP currently offers a higher dividend yield, according to Invesco, while VOO’s yield is lower, according to Vanguard; the exact percentages vary by yield methodology and measurement date.
What the equal-weight shift means from here
Equal-weight strategies captured this year’s wider participation, but over the past decade they trailed the cap-weighted index by more than 100 percentage points.
That gap narrows when mega-cap earnings growth slows, as it has in 2026, and widens when a handful of winners dominate.
Investors buying RSP at $100 billion in assets are betting that the broadening holds, that the other 493 companies can sustain earnings growth strong enough to justify pulling money away from the names that carried the market for three years.
The FactSet projections support that case for now, with the rest of the S&P 500 expected to outgrow the Magnificent Seven on earnings by the fourth quarter. But equal-weight is a market-breadth trade, not a conviction trade.
It pays when leadership is dispersed and punishes when it reconcentrates. If mega-cap momentum returns, equal-weight holders will feel the cost of that bet quickly.
Related: Vanguard’s global ETF fixes the S&P 500’s biggest weakness
