Most people don’t realize that their retirement savings are fueling the wealth of the already rich, creating a self-perpetuating market cycle that might not be sustainable. Now, add in government subsidies and the latest allegations of Social Security Administration (SSA) fund mismanagement, and we have an even bigger mess—one that could indirectly shake up the markets, especially through the subsidiaries of major tech giants.

Every paycheck, millions of people automatically contribute to their 401(k)s. A massive chunk of that money flows straight into index funds, particularly those tracking the S&P 500. Here’s the issue:

• These funds aren’t actively picking stocks—they’re just buying shares based on the stock’s weight in the index.

• That means the biggest companies—the Magnificent 7 (Apple, Microsoft, Nvidia, Amazon, Google, Tesla, Meta)—get the most money because they have the largest market caps.

This creates a self-reinforcing cycle that keeps these giants on top, whether they deserve it or not:

• More Market Dominance – As these companies grow, ETFs and index funds must buy more of their shares to maintain balance.

• Stock Prices Inflate – More buying pressure pushes their prices even higher, increasing their weight in the index.

• Cycle Repeats – This passive investing momentum keeps inflating their value, independent of actual company performance.

This isn’t investing—this is autopilot stock hoarding. And when the money machine eventually slows down or reverses, the impact could be massive.

Scott Galloway recently published a graph showing the total government subsidies received since 2000 by the Magnificent 7—and the numbers are staggering. These companies have built their dominance not just on innovation, but on direct and indirect government financial support.

• Subsidies, Tax Breaks, and Bailouts: Many of these companies have received billions in subsidies and tax incentives, keeping their profits high and competition low.

• Government-Funded R&D: Big Tech companies benefit from federally funded research, whether in AI, cloud computing, or chip development.

• Public Infrastructure Advantage: Tesla’s growth has been heavily reliant on government incentives for EV adoption. Amazon’s expansion has benefited from tax breaks and postal subsidies for package delivery.

Essentially, taxpayers are partially bankrolling these giants, making their market dominance even more artificially inflated than most people realize.

Most people assume SSA funds are tucked away somewhere safe. Technically, they’re not in the stock market, but here’s where things get interesting: 

SSA funds are invested in special-issue U.S. Treasury securities—basically, the government borrows from the SSA to fund spending.

That borrowed money gets pumped back into the economy, indirectly benefiting sectors where the Magnificent 7 and their subsidiaries operate.

Government Contracts – Subsidiaries like Amazon Web Services, Microsoft Azure, and Google Cloud secure massive government contracts—which are indirectly funded by SSA reserves through overall government revenue.

Research & Development – SSA-backed government spending supports tech innovation, often funding initiatives that benefit these same companies.

Fiscal Policy Effects – If allegations of SSA fund mismanagement or fraud (like Elon Musk recently hinted at) are true, the government might need to increase taxes or cut spending. That means fewer government contracts, impacting major tech players and their stock prices.

Market Confidence Shock – If SSA fraud were exposed at a large scale, it wouldn’t just hurt the government’s credibility—it could tank investor confidence across the board, creating a domino effect in financial markets.

Here’s the scary part: The same forces artificially inflating these stocks could just as easily send them crashing down.

1. Retirement Withdrawals Kick In – As more baby boomers retire, they’ll start pulling money out of their 401(k)s. That means ETFs and index funds will need to sell shares instead of just buying them.

2. Stock Prices Drop – With fewer automatic buys, the Magnificent 7’s stocks could lose steam fast.

3. Government Spending Adjustments – If the SSA mess leads to budget cuts, it could hit tech companies that rely on federal contracts and research funding.

4. The Domino Effect – A sharp decline in the Magnificent 7 could trigger a major market sell-off, since these companies hold so much weight in the S&P 500 and Nasdaq.

You can’t control the government’s spending, and you definitely can’t stop index funds from blindly buying. But you can take steps to protect yourself:

• Diversify Your Investments – If your portfolio is mostly index funds, you might be way too exposed to the Magnificent 7 without realizing it. Look into sectors beyond tech to hedge your risk.

• Prepare for Volatility – This passive investment bubble isn’t built on fundamentals—it’s built on momentum. If the cycle slows or reverses, the drop could be fast and painful. Stay alert.

• Pay Attention to Fiscal Policy – If SSA funds are mismanaged or government spending gets reshuffled, it could impact tech’s growth trajectory. Watch for policy shifts that could affect corporate earnings.

This isn’t just about a tech bubble. It’s about how deeply intertwined financial markets, retirement funds, and government spending have become. If one piece collapses, the effects could ripple across the entire economy.