Good morning. On Tuesday I asked readers if they could name examples of non-finance companies that had diversified into finance successfully. One reader bravely defended the record of GE Capital, despite its bad end. Others stuck up for the automakers’ big captive finance operations. Several noted that Starbucks basically takes billions in deposits in the form of payments for gift cards. Others looked abroad, to the big payment businesses built by Alibaba and Safaricom. Most interesting: the Manhattan Company was founded in 1799 by Aaron Burr, ostensibly as a water utility with a sideline in banking. By 1808 it was out of the water business, in 1955 it merged with Chase National, and is now part of a little bank called JPMorgan Chase. Email me: [email protected]

How the market changed

It worries people that so much of the US stock market’s gains come from one company. Two years ago Nvidia was worth $400bn. Now it is worth $3.3tn and is the most valuable company in the world. If something should happen to the AI chipmaker, what will become of the the stock market generally? The worry is justified, but the story is complex. 

I date the start of the current rally in the S&P 500 to late October of last year, when a three-month, 10 per cent drawdown came to an end. Since then the market has risen 33 per cent, increasing in value by about $12tn. Those gains can be neatly broken down into four buckets. Nvidia is alone in one bucket. The next contains the fabulous five tech companies (Microsoft, Alphabet, Amazon, Apple and Meta — sorry Tesla, you’re out). Then there is a group of 10 semiconductor industry companies that have gone bananas in the reflected glory of Nvidia and on hopes for a general digital investment boom. The final bucket contains the remaining 484 companies in the index. This chart shows the dollar contribution of each bucket to that $12tn gain in the S&P over the period: