The artificial intelligence furor gripping the stock market has the shares of chipmakers like Nvidia Corp. soaring, making them increasingly crucial to the broader S&P 500 Index rally. But the stocks are no longer cheap, adding a new level risk to further gains in the broad equities benchmark.

“We like large-cap chip stocks, but their multiples are way too expensive right now, which will leave the broader US stock market even more susceptible to a selloff,” Max Wasserman, senior portfolio manager at Miramar Capital, said in a phone interview.

The Philadelphia Stock Exchange Semiconductor Index is priced around eight times sales, the highest in at least two decades, according to data compiled by Bloomberg. The S&P 500, by contrast, is priced around 3 times sales. Relative to the broader benchmark, the chip index is higher than it was during the dot-com peak in 2000.

Nvidia, Broadcom Inc., Advanced Micro Devices Inc. and Micron Technology Inc. account for about a third of the benchmark’s gain this year, as traditional leaders like Apple Inc. and Alphabet Inc. have lagged behind. That’s given chipmakers, which now make up more than 10% of the S&P 500’s weighting, an unprecedented amount of sway over the index.

The semiconductor industry is notoriously cyclical, with regular boom and bust cycles. Chipmakers have struggled to meet short-term swings in demand with long-term levels of production capacity, which can cause periods of oversupply and shortages. At the moment, the industry is in a boom as companies rush to buy chips to bolster AI computing power. But it’s unclear how long that will last.

“Of course, the outlook on chip stocks is positive, but they’re kind of like a toddler that’s getting hand-me-down clothes,” said Matt Lloyd, chief investment strategist at Advisors Asset Management, whose firm is neutral on tech, with just minor exposure toward chip shares. “It’s going to take awhile for them to grow into the assumptions that are already being priced into these stocks.”

Nvidia’s revenue is projected to rise 81% in its current fiscal year, but just two years ago its sales were flat. Micron’s revenue dropped by nearly half from fiscal 2022 to 2023, when the maker of memory chips lost more than $5 billion. AMD, whose rally has been based on unproven expectations for its AI chip, lost money as recently as 2016.

That kind of volatility is a far cry from the usual technology darlings, like Apple, whose steady sales and profitability have made it a popular destination for investors seeking reliable capital returns and safety.

Meanwhile, the stocks keep getting more expensive. Lofty valuations are a key reason Miramar’s Wasserman trimmed exposure to Broadcom in recent weeks, opting to book profits since the stock had ballooned in the firm’s portfolio.

“Traders think these stocks are just going to keep going up forever,” Wasserman said. “Nvidia and Broadcom are great companies, but at some point this gets ridiculous. Traders need to take a step back and ask themselves ‘what is my risk versus reward for these chip stocks at their current prices?’”

This article was provided by Bloomberg News.