Nvidia’s 230% Gain Lifts Technology ETFs

Financial advisors are warming to AI technology, but remain cautious.

As industry experts debate when, or if, artificial intelligence is going to change how everything gets done, the current poster child, Nvidia Corp., continues to race forward with a 230% gain this year, carrying a raft of ETFs that hold NVDA stock along for the ride. 

The semiconductor company gained new appeal after an eye-popping second-quarter earnings report showed a 101% year-over-year revenue jump and 422% increase in net income over the period.

Even its hefty 113 price-to-earnings ratio isn’t scaring off investors, perhaps because they are more focused on how Nvidia’s forward P/E stacks up against the likes of Amazon Inc. and Microsoft Corp., which are also expected to ride the AI uprising.

“We own a lot of Nvidia and we’ve been waiting for this moment for a long time,” said Michael Sansoterra, chief investment officer at Silvant Capital. 

“AI is a large step forward in computing and therefore is a large step forward in business processes,” he added. “This is a lot like the PCs in the 1980, and like the internet in the 1990s, because there will be a large number of industries affected.” 

ETFs with Nvidia

Nvidia is the largest active position in the Virtus Silvant Focused Growth Fund (PGFIX), and the second largest active position in the Virtus Silvant Large-Cap Growth Stock Fund (STCAX). 

This year, the funds are up 42% and 38%, respectively. 

While that is powerful performance when stacked against an 18% gain by the SPDR S&P 500 ETF (SPY), there are ETFs taking even bigger bets on Nvidia. 

The ProShares Ultra Semiconductors ETF (USD) has a 31.4% allocation to Nvidia and is up 176% this year. 

The VanEck Semiconductor ETF (SMH) has a 21.6% Nvidia weighting and is up 54.3%. 

The fund with the third highest Nvidia weighting at 18.9% is the AXS Esoterica NextG Economy ETF (WUGI), which is up 50.5% this year. 

Financial Advisors on Nvidia’s Performance 

The hot performance still gets mixed reviews from financial advisors, even if they are migrating toward AI technology. 

“We haven’t pushed anything on our advisors, but we know some advisors are putting their clients into AI,” said Jordan Hutchinson, vice president of technology at RFG Advisory. 

Hutchinson, who compares the potential of AI to a “co-pilot that will leverage more time for advisors,” expects the technology to become “one of the solutions that will be integrated into everything we do.” 

“We’re at the beginning stages of creative destruction,” he added. 

Derek Williams, wealth advisor at Veratis Advisors, is embracing a more cautious approach to the AI investing space, with the understanding that high-fliers like Nvidia are already sprinkled across his clients’ portfolios. 

“We’re not currently allocating to AI specifically, either through thematic ETFs or individual stocks, but we find that many of the large tech names are benefiting from this AI wave that’s going through the market,” he said. “If clients are interested in investing in AI, we generally discuss the representation in current broad-based indexes, as well as active fund managers who understand the market and can make more concentrated bets if needed.” 

Contact Jeff Benjamin at [email protected]