The stock market has enjoyed a powerful run, driven largely by the dominance of a handful of mega-cap tech companies. But beneath the surface, new data points to weakening breadth and a widening gap between market-weighted and equal-weighted performance. This imbalance raises concerns about the sustainability of current valuations and investor sentiment. While major indexes continue to post gains, signs of exhaustion are emerging. The question is no longer whether a correction is possible — but when and how deep it might be.

Excitement about the potential of artificial intelligence has become a key driver of the growth of US equities in recent years. AI-focused technology firms have seen a steep rise in value, which has carried the entire market upwards at record speed. The most obvious example is Nvidia. Thanks to "AI mania," its stock tripled in value in less than a year, and the company even briefly became the first chipmaker with a market value of over $1 trillion in May 2023.…