Behind the New High of the S&P 500: A Frenzy in Storage Chips Coexists with Valuation Risks

The S&P 500 index reached a new intraday high, rising by 0.6%. This is not just a number but also reflects the complex current state of the U.S. stock market—beneath the surface of prosperity lie structural opportunities and risks. From a 44% increase since the April 2025 low, the driving force of this rally has expanded from the AI concept stocks to a broader range of sectors. Whether this shift is a healthy market rotation or a risk signal warrants in-depth observation.

The Triple Drivers Behind the New High

Storage Chips Become the New Hotspot

The most direct catalyst is the collective surge in the storage chip sector. NVIDIA CEO Jensen Huang emphasized at CES the explosive demand for high-speed memory and massive storage capacity in data centers, igniting market reassessment enthusiasm for this sector. SanDisk’s stock soared 27%, the largest single-day gain since February last year, Western Digital jumped 16.77%, and Micron Technology and Seagate Technology also achieved double-digit gains. This not only pushed the Philadelphia Semiconductor Index to a record high but also boosted overall market risk appetite.

Capital Rotation Breaks the Monopoly of the Seven Giants

In 2025, the U.S. stock market was long dominated by the “Seven Giants” (large tech stocks), but recent rotation indicates this pattern is changing. Small-cap indices surged amid intense short covering, with the Dow Jones Industrial Average closing above 49,000 points for the first time. Goldman Sachs analysts pointed out that investors are actively rebalancing, shifting funds from last year’s leading stocks to more attractive valuation sectors. This broad upward trend better reflects market confidence recovery than the strong performance of a single sector.

Easing Policies and Earnings Growth Support

According to the latest news, Federal Reserve officials are calling for over 100 basis points of rate cuts by 2026, providing policy support for risk assets. Goldman Sachs expects the S&P 500’s earnings per share (EPS) to grow by 12% in 2026, providing a fundamental basis for a sustained bull market. This means the new highs are supported not only by technical breakthroughs but also by earnings and policy fundamentals.

Underlying Concerns: Valuation and Concentration at Historic Extremes

Valuation Levels Near Historic Highs

Currently, the forward P/E ratio based on expected earnings over the next 12 months for the S&P 500 is as high as 22x, matching the peak in 2021. Goldman Sachs strategist Ben Snider stated in a recent report that this valuation level resembles characteristics seen before several major crashes in the past century. In other words, while Goldman Sachs maintains an optimistic forecast of the S&P 500 reaching 7,600 points in 2026, it also issues a stern warning.

Concentration Risk Still Present

Although funds are beginning to rotate, market concentration remains high. Goldman Sachs pointed out that the core tension in the current U.S. stock market lies in the contradiction between a “solid fundamental background” and “valuation multiples near all-time highs.” Once triggered, this structural fragility could lead to rapid market adjustments.

The True Reflection of the Market

Interestingly, the commodity markets tell a different story. According to reports, gold’s return in USD is as high as 65%, far surpassing the 18% return of the S&P 500. Billionaire investor Ray Dalio believes that fiat currency devaluation is the most overlooked trend of 2025. This indicates that even as U.S. stocks hit new highs, investors are hedging risks by allocating assets like gold and other safe havens.

Key Focus Areas Moving Forward

While the new high of the S&P 500 is a positive signal, whether the market can sustain its upward trajectory depends on:

• Earnings Realization: Will the 12% EPS growth forecast by Goldman Sachs materialize on schedule?
• Policy Implementation: Will the Fed’s rate cut plans proceed as expected?
• Valuation Adjustment: Can the current 22x P/E ratio be absorbed through earnings growth?
• Capital Flows: Will the rotation continue or is it just a short-term phenomenon?

Summary

The new high of the S&P 500 results from multiple factors—surge in storage chip demand, capital rotation breaking the monopoly of the giants, and supportive easing policies. However, behind this prosperity, valuation and concentration risks are approaching historical extremes. Goldman Sachs’s optimistic forecast (7,600 points) coexists with warnings of risks similar to those before past market crashes, indicating the current market is at a delicate balance. For investors, the key is to enjoy this rally while remaining vigilant about potential structural risks. The true picture of the market is not only the joy of reaching new highs but also a stern test of the fundamentals’ ability to deliver.