Nvidia Corp.’s (NASDAQ:NVDA) market capitalization climbed to $5.4 trillion on Friday, putting the AI-chip leader’s valuation nearly $2 trillion above the combined market value of the Russell 2000, according to data highlighted by Creative Planning’s Charlie Bilello.

The striking gap comes as investors continue to pour money into companies positioned to benefit from the artificial intelligence boom. But investor Michael Burry, is raising questions about the sustainability of some AI assumptions.

That combination is increasingly relevant for ETF investors, whose portfolios can have significant exposure to the same mega-cap technology companies driving the market higher.

Nvidia Towers Over Small Caps

Nvidia’s $5.4 trillion valuation crossed that of the Russell 2000 Index’s $3.5 trillion, based on the figures cited by Bilello.

Bilello also highlighted a fundamental reason behind the disparity. Nvidia generated approximately $193 billion in profit over the previous year, while Russell 2000 companies (small-caps) collectively recorded a $13 billion loss, according to his data.

The comparison illustrates how dramatically profitability and investor expectations have diverged between the largest AI beneficiaries and smaller U.S. companies.

Nvidia is not alone. Apple, Inc (NASDAQ:AAPL), Alphabet, Inc (NASDAQ:GOOGL) and Microsoft Corp (NASDAQ:MSFT) had market capitalizations of approximately $4.98 trillion, $4.17 trillion, and $3.83 trillion, respectively, as of Friday.

Nvidia’s Weight Matters for Broad-Market ETFs

That concentration matters because market-cap-weighted ETFs automatically give larger companies greater portfolio representation.

Nvidia accounts for roughly 8.08% of the Vanguard S&P 500 ETF (NYSE:VOO), while Apple, Microsoft, Amazon.com, Inc, Alphabet and Broadcom, Inc added substantially to the fund’s exposure to mega-cap technology.

That means buying an S&P 500 ETF is no longer simply a bet on 500 companies equally sharing in U.S. economic growth. The largest companies command a disproportionately large share of the portfolio because of their market values.

QQQ Makes the Concentration More Visible

The concentration is even more pronounced in the Invesco QQQ Trust (NASDAQ:QQQ), where Nvidia represents about 8.2% of the portfolio.

This creates a powerful feedback loop. As Nvidia and other mega-cap AI beneficiaries gain market value, their weights in market-cap-weighted ETFs rise. Investors subsequently holding those ETFs have greater exposure to the companies driving the gains.

For investors seeking less concentration, the Invesco S&P 500 Equal Weight ETF (NYSE:RSP) offers a different structure. Rather than allowing the largest companies to dominate, its underlying index assigns roughly equal weights to S&P 500 constituents.

Burry Questions AI’s Long-Term Path

Burry’s latest comments introduce a different risk to the equation.

He warned that increasingly recursive use of AI-generated material to train future models could lead to "model collapse," citing research published in Nature that found repeated training on synthetic data can cause models to lose information from the tails of the original data distribution.

He also questioned whether large language models can ultimately achieve artificial general intelligence, arguing that language alone cannot produce genuine understanding.

Burry’s comments do not directly challenge Nvidia’s earnings or valuation, but raise a broader question about how much of today’s mega-cap valuations depends on assumptions about the continued expansion and capabilities of AI.

The issue is not simply whether Nvidia can continue growing. It is whether the increasingly concentrated market exposure carried by major ETFs leaves portfolios particularly sensitive to changing expectations around the AI investment cycle.

Photo: generated using artificial intelligence via Gemini.