NEW YORK (Reuters) - Technology shares have led U.S. stocks to record highs and are expected to continue to rise, but as market value becomes concentrated in the largest companies, some are beginning to look for the next rally leader.

A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 2, 2017. REUTERS/Brendan McDermid

The technology sector of the S&P 500 .SPLRCT has risen roughly 20 percent so far in 2017, led by Apple AAPL.O, Alphabet GOOGL.O, Facebook FB.O and Microsoft MSFT.O.

The only other company with comparable gains in market value this year is Amazon AMZN.O, a market darling not in the tech sector despite being a big player in cloud services and data storage.

“These are the dominant players in their specific spaces and the hottest areas in tech,” said Daniel Morgan, senior portfolio manager at Synovus Trust Company in Atlanta, highlighting their exposure to the cloud and artificial intelligence.

“You will continue to see money flowing into those names. People want to be exposed to the hottest areas,” he said.

(To view a graphic on 'The Five Horsemen: growing influence of largest technology companies' click reut.rs/2sntpYb)

Active funds have continued to throw their money behind the leaders with a record overweight on the technology sector, according to BofA/Merrill Lynch data going back to 2008.

But more than a third of the 2017 gains in the S&P 500 have come from these five companies, and the concentration of the advance has some investors jittery.

“Given how significant the (large cap) leadership has been year to date, I kind of think you need to find another group to produce that leadership,” said Jim Tierney, chief investment officer of concentrated U.S. growth at AllianceBernstein in New York.

Echoing Dell[DI.UL], Cisco CSCO.O, Intel INTC.O and yes, Microsoft itself, the leaders of the Y2K tech boom, these new "five horsemen" have added more than $612 billion in value to the stock market this year. Their 2017 gains alone could buy the 85 smallest companies of the S&P 500.

Their combined value, near $3 trillion, is not far from the market value of all the other components of the Nasdaq 100.

NOT THAT EXPENSIVE, BUT...

This tech rally has come hand in hand with heightened expectations for profits. Investors are currently paying $18.50 for every $1 in earnings expected over the next 12 months in the sector, compared to the more than $40 they paid during the dot-com bubble and even the $20-plus seen during the most recent market peak in 2007.

Tech sector earnings are expected to grow 11 percent in the second quarter after rising near 21 percent in the first, according to Thomson Reuters I/B/E/S data.

However, with gains of more than 33 percent for Apple, Facebook and Amazon, near 25 percent for Alphabet and 15 percent in Microsoft, compared to a gain of 8.5 percent for the S&P 500, the room for more upside is declining.

Despite expecting gains upward of 20 percent for the rest of the year on the so-called FANG stocks - Facebook, Amazon, Netflix and Alphabet - and their ilk, analysts at Fundstrat recommended in a Friday note balancing portfolios by scooping up the year’s underperformers: banks, energy and telecoms.

They are not alone in searching for exposure outside technology.

“We’re most overweight in technology but I don’t want to stay too long at the party,” said Alan Gayle, director of asset allocation at RidgeWorth Investments in Atlanta.

“What I’m watching for is an opportunity to lighten up on tech exposure and put it into some of the more cyclical areas,” he said. “Financials are going to be catching a tailwind.”

AllianceBernstein's Tierney bets beyond tech on healthcare .SPXHC, the second-largest sector weight on the S&P 500.

“Healthcare has really lagged the last 18 months or so. They could certainly pick up the mantle.”