You Owe Your S&P 500 Gains to Nvidia

If you own the SPDR S&P 500 ETF Trust (SPY) you owe nearly a third of your gains to one stock. 

Of SPY’s 8.4% return so far this year, 2.7 of those percentage points come from Nvidia’s 87% surge. That means that a single stock accounts for around a third of the S&P 500’s gain. 

While certainly an eyebrow-raising statistic, it’s not unprecedented to see a single stock drive so much of the index’s return. 

In 2023, Microsoft accounted for 3.4 percentage points of the S&P 500’s 26.2% return. In 2021, the same stock accounted for 2.8 percentage points of the index’s 28.7% return. 

Meanwhile, in 2020 and 2019, Apple contributed 3.9 and 2.8 percentage points, respectively, to the S&P 500’s 18.4% and 31.3% returns. 

That single stocks have accounted for so much of the S&P 500’s performance in recent years reflects the huge weightings that these stocks have in the index.  

When a stock represents 5% of the index, just a 10% move in either direction can drive a half a percentage point change in the level of the index.  

When those same stocks move 20%, 30%, or even more as they’ve done in recent years, the impact can be much larger.  

NVDA Stock Risk, S&P 500 Weighting

There’s been a lot of talk about the parabolic ascent of Nvidia and how it’s a risk to the market given how the stock represents over 5% of the S&P 500.  

While a Nvidia crash could certainly have broader implications for the stock market by bringing down other tech stocks, on its own, even a halving of Nvidia would only shave roughly 2.5 percentage points off the S&P 500.  

That’s not small by any means, but it’s also something that—if it were to happen—probably wouldn’t take place overnight, giving other stocks an opportunity to compensate for it.