Monday, August 18th, 2025
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In the 20th century, corporate America’s biggest winners were built on concrete, steel, and physical goods. Their balance sheets brimmed with factories, machinery, and warehouses.
Fast forward to today, and the picture has flipped. Roughly 90% of the assets behind the S&P 500’s giants are intangible, things you can’t touch but which can be worth billions: intellectual property, software, brand value, patents, data, creative talent, and know-how.
This quiet revolution helps explain three big themes that define the US stock market today: (1) Unprecedented market concentration, (2) America’s dominance over other global markets, and (3) Valuations that can look high.
The tipping point came in the late 1990s, when US companies began investing more in intangibles than in physical assets. Since then, the gap has only widened. According to the World Intellectual Property Organization (WIPO), US spending on intangible assets reached $4.7 trillion last year, almost double what France, Germany, the UK, and Japan spent combined.
Why does this matter? Intangibles have very different economics. Once you’ve built them, they can be replicated at almost no cost. As Kai Wu of Sparkline Capital puts it: “Once code is written, producing additional units of software costs nothing.”
This scalability creates a winner-takes-all dynamic. Apple’s ecosystem, iOS, the App Store, and iCloud, reinforces the iPhone’s dominance and keeps rivals at bay.
First movers in this space grow rapidly, building competitive moats. Research from McKinsey shows that, between 2011 and 2019, just 5% of US companies generated 78% of all positive productivity growth. These superstar firms now dominate not just their industries, but the stock market itself.
Today, the top 10 companies make up 40% of the S&P 500’s market value and a third of its profits. Most are the so-called ‘Magnificent 7’ tech stocks: Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia, and Tesla. Their fortunes are built on code, algorithms, platforms, and, increasingly, artificial intelligence.
Network effects amplify this dominance. Amazon’s marketplace becomes more valuable with each new buyer and seller. Google’s search engine improves as more people use it. These feedback loops are rocket fuel for market concentration.
Intangibles also explain why US markets have outperformed their global peers. The MSCI US index has a far higher weighting in tech and healthcare, sectors that thrive on intangible assets, compared to international benchmarks, which are more tilted towards banks, manufacturers, and materials.
This difference in sector make-up has led to big gaps in growth, profitability, and valuations. Even when Big Tech spends billions on data centres, those facilities are just a means to create more intangible assets like AI models, software tools, and proprietary data, not a shift back to a physical-asset economy.
As long as US firms hold a lead in data, talent, and platforms, this advantage over Europe and other developed markets is likely to persist, if not widen.
By traditional measures, the S&P 500 looks expensive. Price-to-earnings and price-to-book ratios are both at historically high levels. But here’s the catch: accounting rules treat most intangible investment as an expense rather than an asset (unless it’s acquired in a takeover). That makes intangible-heavy companies look costlier than they might really be.
WIPO estimates that unmeasured intangible assets in the US were worth about $2.7 trillion last year. If these were included in GDP and company accounts, the perceived overvaluation of US stocks could shrink by 25–50%, according to Sparkline Capital.
That doesn’t mean the market is cheap, but it does suggest that headline valuation metrics may be overstating the frothiness.
The US stock market isn’t just being driven by speculation, liquidity, or politics. Its shape reflects the economics of the intangible age, where software, networks, data, and intellectual property can generate outsized growth and protect market share.
Market leadership could remain narrow for a long time, as these intangible-driven firms continue to reap the benefits of scale and network effects.
Understanding the rise of the intangible economy can make today’s US market look less like a bubble and more like the logical outcome of a new kind of corporate power.
We would like to thank Dominion Capital Strategies for writing this content and sharing it with us.
Sources: Bloomberg, Yahoo Finance, Marketwatch, MSCI.
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