Nvidia Stock Is a Top Holding in These Tech ETFs

Nvidia Stock Is a Top Holding in These Tech ETFs

The cutting-edge chip stock continues its explosive growth in market cap and position in ETFs.

kent
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Research Lead
Reviewed by: etf.com Staff
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Edited by: Ron Day


 

As the demand for artificial intelligence continues to grow, Nvidia is well-positioned to benefit in the long term as are the tech ETFs that invest in NVDA stock. The company is expected to continue to grow its market share and revenue in the years to come, although investors are wise to expect price volatility for NVDA shares in the short term. 

See how Nvidia became a top AI industry leader and check out the details on the tech and AI ETFs with Nvidia stock as a top holding. 

How Nvidia Became a Top AI Industry Leader 

Nvidia is crucial to the growth of artificial intelligence (AI) because it manufactures the graphics processing units (GPUs) that are used to power AI applications. GPUs are much faster than CPUs for processing large amounts of data, which makes them ideal for AI applications such as machine learning and deep learning.  

In addition to its leading market share in the GPU market, Nvidia is also a leader in the development of new AI technologies, such as artificial intelligence accelerators and software frameworks. These technologies are essential for making AI more accessible and powerful. 

Here are some of the reasons Nvidia is so important to the growth of AI: 

  • Nvidia powers multiple AI applications: Nvidia’s GPUs are used to power or optimize a range of AI applications, including self-driving cars, virtual reality, robotics and gaming PCs. 
  • Nvidia’s GPU market share: In 2022, Nvidia had a market share of 82% in the GPU market, according to the International Data Corporation. Nvidia's GPUs are the most powerful GPUs on the market and are designed specifically for AI applications. This makes them the preferred choice for AI developers and researchers. 
  • Nvidia's DGX: DGX is a family of high-performance computing systems. The DGX A100 is the most powerful system in the family and is designed for the most demanding AI workloads, such as training large language models and developing self-driving cars. 
  • Nvidia’s track record of innovation: Nvidia has been at the forefront of the development of AI for many years. The company has a strong track record of innovation and is constantly developing new technologies that make AI more powerful and accessible. 

Nvidia Has Exposure in AI, Semiconductor and Tech ETFs 

Tech ETFs are a major holder of NVDA stock, specifically in funds focusing on the AI and semiconductor industries. The primary reason Nvidia is a top holding in many technology sector ETFs is because its products power a range of AI applications. 

AI ETFs 

While Nvidia is not directly in the artificial intelligence industry, AI ETFs are a natural fit for NVDA stock, as Nvidia’s GPUs are used to power many AI applications. The largest AI ETF to hold NVDA is the Global X Robotics and Artificial Intelligence ETF (BOTZ), with an allocation weight of 9.%. 

Semiconductor ETFs 

While Nvidia does not physically manufacture semiconductors, the company is a large consumer of them and primarily buys its chips from Taiwan Semiconductor Manufacturing Company (TSM). The largest semiconductor ETF to hold NVDA stock is the VanEck Semiconductor ETF (SMH), which has an allocation weight of 20.7%. 

Tech ETFs 

Tech ETFs generally encompass the broader technology sector, which includes AI and semiconductor stocks. For this reason, tech ETFs tend to be large holders of Nvidia, but their allocation percentage weights are not high. For example, the largest broad sector tech ETF, the Technology Select Sector SPDR Fund (XLK) has a modest NVDA stock allocation weight of 4.6%, but the fund is so large that the holding represents $3 billion of NVDA’s market value. 

Tech and AI ETFs With Highest Exposure to NVDA Stock 

Currently, over 500 ETFs hold Nvidia stock. The largest ETF to hold NVDA is the SPDR S&P 500 ETF Trust (SPY), with over 29 million shares, representing a 5% allocation and $28 billion in market value. But the funds with the highest exposure to NVDA by allocation percentage, exceeding 10% of portfolio value, are semiconductor ETFs and AI ETFs. 

ETFs With the Highest Allocation Percentage of NVDA Stock

TickerFundNVDA Allocation %AUMYTD Return
SHOCStrive U.S. Semiconductor ETF27.2%$64.8M14.6%
WUGIAXS Esoterica NextG Economy ETF27.1%$28.8M24.3%
SMHVanEck Semiconductor ETF20.7%$19.6B32.8%
FDGAmerican Century Focused Dynamic Growth ETF14.9%$207.5M16.2%
FFOGFranklin Focused Growth ETF14.4%$75.4M17.9%

Performance data as of May 16, 2024.

The Future of AI ETFs

Despite the potential risks, such as short-term market volatility, the future of AI ETFs appears bright. The market for artificial intelligence is expected to show strong growth in the coming decade, from a recent valuation of about $100 billion up to nearly $2 trillion by 2030. With the AI market growing rapidly, ETFs that focus on AI stocks are a good way to get exposure to this growth.

AI ETFs, such as BOTZ, gained as much as 25% or more in 2023, leading up to the Nvidia earnings report on August 23. How AI-related stocks and ETFs perform in the short term is uncertain, but the long-term outlook is positive for artificial intelligence and the ETFs that invest in the technology. 

The Bottom Line on Tech ETFs With NVDA Stock 

Artificial intelligence is the driving force behind the growth of NVDA stock because Nvidia’s technology is what helps to power AI applications, such as self-driving cars, robotics and gaming PCs. Therefore, the success of AI ETFs and other tech ETFs that hold NVDA will depend largely on the continued growth of the AI market.

As with any other investment, investors should weigh the benefits and risks of holding AI ETFs and other tech ETFs that may have exposure to NVDA stock.

Kent Thune is Research Lead for etf.com, focusing on educational content, thought leadership, content management and search engine optimization. Before joining etf.com, he wrote for numerous investment websites, including Seeking Alpha and Kiplinger. 

 

Kent holds a Master of Business Administration (MBA) degree and is a practicing Certified Financial Planner (CFP®) with 25 years of experience managing investments, guiding clients through some of the worst economic and market environments in U.S. history. He has also served as an adjunct professor, teaching classes for The College of Charleston and Trident Technical College on the topics of retirement planning, business finance, and entrepreneurship. 

 

Kent founded a registered investment advisory firm in 2006 and is based in Hilton Head Island, SC, where he lives with his wife and two sons. Outside of work, Kent enjoys spending time with his family, playing guitar, and working on his philosophy book, which he plans to publish in the coming year.