AI-related stocks now hold nearly half of the S&P 500's market value, a concentration that turned last week's sector sell-off into the index's worst performance since June. According to Bianco Research, 41 artificial intelligence companies accounted for almost 49% of the index's combined market value in early October. Bianco noted this level of concentration exceeds any past market episode except the 19th-century railroad boom. The weight of these holdings meant that trouble in AI-linked stocks quickly dragged down the broader market. Even though only four of the S&P 500's 11 sectors declined, the index lost nearly 2%. The technology sector, the index's largest component, dropped almost 8%, pulling the overall average down with it.
This structural shift means that index fund investors may have more exposure to AI volatility than they realize. Many AI-linked companies grow quickly and their shares can swing sharply on inflation data and earnings reports. Because these companies carry so much of the index, those swings can reach almost any stock portfolio. The recent sell-off likely got the attention of many investors, raising questions about whether last week marked a pause in a long climb or the start of a deeper decline. Professional forecasters cannot say where the market will be a month or a quarter from now.
For those waiting for a dip to buy an AI-linked company, the recent drop may look like an opportunity, though uncertainty remains high. By last Friday, CNN's Fear & Greed Index had dropped into its Extreme Fear zone. In response to such volatility, financial advisors from The Motley Fool, including David Gardner and Tom Gardner, have advocated for an approach called buying in thirds. Research from Vanguard suggests this strategy tends to make slightly less money on average than investing a lump sum immediately, but it may be worth the trade-off in highly volatile markets.
The process involves splitting a planned investment into three equal parts. For example, if an investor sets aside $3,000 for a stock or fund, they buy the first $1,000 piece immediately. The second $1,000 is purchased on the same date the following month or quarter, and the third $1,000 is bought one period later at whatever price the stock trades for. If prices rise, part of the investment is already working. If prices fall, the remaining thirds will likely be cheaper, bringing down the average cost per share.
David Gardner described the approach as an incredibly effective win-win way to get invested in volatile stocks trading at high levels. Tom Gardner agreed with this perspective after his September 2025 Quarterly Call. He advised members to view investments over a five-year horizon and consider each purchase as an asset they would not be able to sell for a long period. From this long-term perspective, he stated that buying in thirds can be a good idea. He also encouraged members to try small positions in ideas that interest them; if those work out, the gain might cover a few free dinners, while if they do not, the cost is merely a few low-cost meals at home.
Historically, U.S. stocks have risen more often than they have fallen, meaning money held back can sit idle while prices climb. Vanguard research found that investing a lump sum right away beats spreading it out about two-thirds of the time. However, The Motley Fool's view is that this small cost can be worth paying if it gets an investor into the market at all. Buying in thirds may be worth that trade-off if two conditions are met: the investor believes the company will be worth meaningfully more in three or more years, and without a plan, they would likely keep waiting or put everything in at once on a hunch.
Whether last week's decline was a pause or a turn may not be clear for months. Buying in thirds is designed to hold up either way. For investors who have been circling an AI-linked stock and believe in the business, this pullback could be a reasonable moment to buy the first third and put the next two dates on their calendar.