Why Nvidia's slide is no big deal for many ETF investors
Nvidia fell more than 10% early Thursday, yet most ETF and mutual fund investors barely felt it: the stock is only 6% to 8% of popular funds, and no surveyed advisers are selling.
A sharp drop, a small dent
Nvidia fell more than 10% in early trading on Thursday after Jensen Huang stepped down as chief executive, then pared losses and was down more than 5% by the afternoon. The S&P 500 and the Nasdaq Composite were down slightly for the day at that time.
For most fund investors, the damage was far smaller than the headlines suggested. Philip Chao, chief investment officer at Experiential Wealth, put it simply: "It's not a big deal." His example: if Nvidia were 5% of a fund and the stock dropped 10%, the fund would decline 0.5%, all else equal.
The math inside the big funds
Many popular funds hold roughly 6% to 8% in Nvidia. In the Vanguard S&P 500 ETF, known as VOO, Nvidia is the largest holding at about 8.4% of the portfolio as of September 30. The fund had a market capitalization of $1.7 trillion as of September 30, according to Vanguard data cited by CNBC. A 5% drop in Nvidia would cost the fund about 0.42%; a 10% drop would cost 0.84%.
In the Invesco QQQ Trust, which tracks the Nasdaq-100, Nvidia is the second-largest holding at 6.8%, behind Apple at about 8.4%. The fund held about $473.8 billion as of November 10. A 5% Nvidia drop would cost the fund 0.34%; a 10% drop would cost 0.68%. In the Vanguard Total Stock Market ETF, known as VTI, Nvidia is the largest holding at about 7.13% as of September 30, and the fund held $1.8 trillion as of October 31. A 5% drop would cost roughly 0.36%; a 10% drop, roughly 0.71%. Morningstar data show large-growth funds hold the largest average Nvidia weighting, 10.34% as of Wednesday, with technology-sector funds second at 7.31%.
- Nvidia weight in VOO8.4%
- Nvidia weight in QQQ6.8%
- Nvidia weight in VTI7.13%
- 10% Nvidia drop costs VOO0.84%
- Advisers polled27, none selling
What advisers are doing
A flash poll of CNBC's Financial Advisor Council and Financial Advisor 100, sent to 122 firms on Thursday, drew 27 responses: 18 plan to hold Nvidia allocations steady, 3 are increasing their stake, 6 do not own it, and none are decreasing ownership.
There is a catch. A 10% Nvidia drop would usually pull down other semiconductor and AI-linked names such as AMD and Micron, so fund losses could exceed what Nvidia holdings alone suggest, Chao said. Renée Friedman, global head of research at EXANTE, said: "This event could easily add further pressure to already stretched AI-related stock valuations."
