Your 401(k) is funding the AI boom. Here’s what that means for your retirement

“They didn’t choose to buy these stocks, and they don’t really know what’s going on,” said Hera Hyeonseo Lee, a doctoral researcher at Binghamton University. About 54% of U.S. households have a 401(k), according to the Federal Reserve, and the overwhelming majority of these retirement plans default into cap-weighted index funds that buy all the stocks in the market and buy more of the biggest companies. “So whenever a company like Nvidia grows and takes up more of the S&P 500, the fund automatically buys more of it,” Lee says. That happens no matter how expensive or big the company gets, and it has long made good sense. “Market cap weighting isn’t a choice, it’s not a methodology, it just is,” said Jim Rowley, global head of indexing strategy and solutions at Vanguard. “Investors collectively have decided that one stock should be this large, or another stock should be this small.” Anyone who owns one stock or weighs a stock differently than the market consensus…