• Apple Inc. now has a market cap value of nearly $1.4 trillion
  • Apple Inc. accounts for nearly 5% of the S&P 500 Index
  • Apple shares surged 86% in 2019

Apple Inc. (AAPL), which now has a market cap value of nearly $1.4 trillion, accounts for 4.99% of the weighting of the vaunted S&P 500 Index.

Once it passes the 5% mark, it will be the first stock to reach that level since Exxon Mobil Corp. (XOM) did it in March 2009.

Interestingly, Apple almost breached the 5% barrier back on Sept. 4, 2012, when it peaked at 4.999% before its stock price plunged by more than 20% through the end of that year.

Apple and Microsoft (MSFT) now account for nearly 10% of the S&P 500 Index. Microsoft currently represents 4.86% of the index. (Microsoft actually exceeded the 5% level for one day way back in December 1999.)

In the tech-heavy Nasdaq, Apple and Microsoft now account for a whopping 20% of the index.

Tech stocks now dominate the stock market landscape and the minds of investors.

The five largest tech companies -- Apple, Microsoft, Alphabet (GOOGL) (parent of Google), Amazon (AMZN) and Facebook (FB) -- now together make up at least 17.5% of the S&P 500 index, raising the risk of overexposure for passive investors.

Morgan Stanley equity strategist Mike Wilson wrote recently that “a ratio like this is unprecedented, including during the tech bubble.”

Thus far, heavy bets on big tech have paid off for investors -- Apple surged 86% in 2019, while Microsoft leaped 55%.

“As more of these winners reach this mega-cap status, they dominate the end investments,” said Scott Acheychek, president of REX Shares, a firm that develops exchange-traded products. “I constantly pound the table and beg people to know what you’re investing in, what’s inside your product and what you’re looking for.”

Apple also accounts for nearly 20% of various ETFs, including Technology Select Sector SPDR ETF (XLK), Fidelity MSCI Information Technology Index (FTEC) and Vanguard Information Technology ETF (VGT).

But when the downturn in the market inevitably comes, volatile tech stocks may be hit the hardest.

One way to avoid too much exposure to large tech stocks is to invest in equal-weighted index funds, whereby small companies have the same weighting and influence as the Apples and Microsofts.

“If financial advisers are uncomfortable with tech weightings, they can use equal weighting,” said Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices. “The products we have reflect reality just fine.”

Some other analysts are concerned by tech’s dominance and concentration.

"Size can be an advantage, but the advantage can also go away," said Vito Sciaraffia, chief investment officer at Innealta Capital.

But other investors see nothing wrong with buying big runaway favorites.

"I'm not an aggressive growth investor and I'm not a value investor. I'm a stock investor," said Stephen Weiss, managing partner of Short Hills Capital Partners. "And when I look at a company I decide, do I want to own it or not. It could be worth a trillion and a quarter or 2 trillion, I just don't look at how the world categorizes it."

Weiss added: "those who cannot concentrate their portfolios operate out of ignorance."

And some analysts think Apple will get even bigger – especially when it introduces its new 5G phone line later this year.

“5G is one of those undeniable transformative trends,” said Daniel Ives, Wedbush Securities’ managing director of equity research. “The first and biggest beneficiary will be Apple. With a 95% retention rate (when customers upgrade phones), it’s like hitting the Lotto.”

Ives recently hiked his price target on Apple stock to $400.

Ives projected sales of 5G phone units to hit 195 million in fiscal 2020, then climb to 215 million to 220 million in fiscal 2021.

As a result, Ives said, Apple’s market valuation could approach $2 trillion in a few years, which would greatly increase its weighting in the S&P 500 and innumerable index funds.