(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Jamie McGeever

ORLANDO, Florida, Jan 27 (Reuters) - The jury is still

out on whether Chinese artificial intelligence startup DeepSeek

will be the disruptive straw that breaks Wall Street's back. But

it has certainly called into question the "U.S. exceptionalism"

narrative that has helped create unprecedented concentration -

and risk - in U.S. markets.

The assumption that Silicon Valley is the unassailable

leader in the global AI arms race is a key reason why U.S.

markets have sucked in trillions of dollars from around the

world in recent years. This trend has come to define U.S.

exceptionalism, the deep-rooted belief in the continued

outperformance of U.S. growth and Wall Street returns.

But this narrative may be starting to unravel because of a

Chinese startup that few outside the AI world had even heard of

until last month. DeepSeek, which has operated on a shoestring

budget, appears to be achieving similar or better results than

U.S. behemoths that have spent hundreds of billions of dollars

developing AI technology.

"To see the DeepSeek new model is super-impressive,"

Microsoft ( MSFT ) CEO Satya Nadella told CNBC in Davos last week. "I

think we should take the development out of China very, very

seriously."

Investors certainly should, especially when the fate of the

entire U.S. stock market - indeed, global markets - is being

driven by so few companies and essentially one AI story.

The clout Big Tech wields over Wall Street is eye-watering.

Just look at the numbers:

* Before Monday's market rout, just five stocks - Nvidia ( NVDA )

,

Microsoft ( MSFT ), Alphabet, Amazon ( AMZN ), and

Meta - had contributed around 700 points to the S&P 500

over the last two years. Excluding these stocks, the S&P

500 would be 12% lower, according to SocGen's Manish Kabra.

Nvidia ( NVDA ) alone had contributed 4 percentage points to the

performance of the S&P 500's two-year gains through Monday.

* Nvidia's ( NVDA ) last 12 months of earnings, reported in its most

recent

quarterly results, totaled roughly $63 billion, which is around

half the total made by all listed companies in each of Britain,

Germany and France over the last year, according to Deutsche

Bank's Jim Reid.

* These companies plus Apple ( AAPL ) and Tesla -

the

"Magnificent Seven", or "Mag 7" - have accounted for nearly 60%

of the S&P 500's gains in the past two years, according to Bank

of America analysts.

In short, the "Mag 7" embodies the "American exceptionalism

premium on the S&P 500," as Kabra wrote on Monday.

'PEAK MONOPOLY'

Wall Street has never been beholden to so few stocks, with

the "Mag 7" now accounting for over 35% of the S&P 500's entire

market cap. Meanwhile, U.S. stocks currently account for a

record two-thirds of global equity allocation.

This is in part due to a virtuous cycle of inflows: as "Mag

7" stocks have soared, the U.S. has made up an ever larger

percentage of global equities' market cap, meaning investors

holding passive portfolios have to continue increasing their

U.S. exposure, fueling price gains and necessitating further

purchases.

But market concentration has been increasing for some time,

as noted by Hendrik Bessembinder, professor of finance at

Arizona State University in his 2023 study "Shareholder Wealth

Enhancement, 1926 to 2022." He found that just 3% of the 28,114

U.S. firms publicly listed from 1926 to 2022 produced almost all

of the $55 trillion in shareholder wealth created in that time.

Apple ( AAPL ) alone accounted for nearly 5% of the total, and the

top three companies - Apple ( AAPL ), Microsoft ( MSFT ) and Exxon Mobil ( XOM ) -

together represented more than 10%.

This concentration has only accelerated in recent years. In

2016, the number of firms required to accrue 10% of gross

shareholder wealth created was seven. This fell to four in 2022.

This could represent "Peak Monopoly", as BofA analysts

suggest. And history shows monopolies never last forever, partly

because of the emergence of disruptive technologies.

Indeed, as technological change has sped up, the average

life span of S&P 500-listed companies has shrunk. According to a

McKinsey study, the average lifespan of an S&P 500 firm in 1958

was 61 years. By 2023, that was down to less than 18 years.

Disruptive technologies have always propelled the U.S.

economy and markets, and never more so than today. "Disruption

always wins," as Bank of America's analysts note.

It remains to be seen who the winners and losers will be if

DeepSeek's sudden emergence proves to be truly disruptive. But

if Monday's market tremors are any guide, there may be quite a

few losers - big ones.

(The opinions expressed here are those of the author, a

columnist for Reuters.)