Nvidia's stock has experienced an astounding rally this year, propelling the AI chip leader's valuation past $3 trillion and establishing itself as a significant presence in the S&P 500. According to Apollo Chief Economist Torsten Sløk, Nvidia alone is responsible for a remarkable 34.5% of the S&P 500's market cap gains thus far in 2021.

With shares skyrocketing by 166% year-to-date and over 200% from the previous year, Nvidia has capitalized on the growing frenzy surrounding artificial intelligence in the investment landscape. The company's strong quarterly earnings demonstrate the unrelenting demand for AI chips, suggesting that the trend shows no signs of slowing down.

However, Sløk sounded a note of caution, emphasizing the risks associated with such heavy reliance on a single stock. In a note issued recently, he voiced concerns that if Nvidia experiences a decline, it could have a significant impact on the S&P 500 as a whole. Sløk pointed out that due to the market cap-based weighting of the index, even minor fluctuations from behemoths like Nvidia, Apple, and Microsoft can greatly influence the broader stock market.

The concentration of returns within the S&P 500 has made investors increasingly vulnerable to single headlines impacting the performance of the dominant stocks. As retail investors continue to allocate funds into S&P 500 index funds, exposure to Nvidia—both positive and negative—continues to expand.

This is not the first time that Sløk has raised concerns about the stock market's dependence on Big Tech. When Nvidia's market cap surpassed $2 trillion earlier this year, he drew parallels between current tech valuations and the dot-com bubble of the mid-1990s. He asserted that the top 10 companies in the S&P 500 today are even more overvalued than their counterparts during the tech bubble era.

As doubts about Nvidia's valuation and attractiveness as an investment grow among certain entities on Wall Street, others remain bullish on the stock. Beth Kindig, lead tech analyst at the I/O Fund, predicts astronomical gains for Nvidia in the coming years, forecasting its market cap to surge beyond $10 trillion by 2030.

Meanwhile, Nvidia's CEO, Jensen Huang, continues to surprise investors and analysts alike. He recently unveiled plans for a rapid series of new AI platforms, including the Blackwell Ultra chip scheduled for release in 2025 and a next-generation platform called Rubin under development for 2026.

While Nvidia's dominant position has undoubtedly propelled the stock market and attracted considerable attention from investors, concerns about overreliance on a single stock loom large. As market dynamics evolve, investors will keep a close eye on Nvidia's performance and its impact on the S&P 500 as a whole.