ETFs
3 ETFs to Buy to Dominate the Nvidia Stock Market
Nvidia (NASDAQ:NVDA) has become a dominant holding in a number of technology-focused exchange-traded funds (FNBs) in the midst of its glorious rise. Although NVDA stock is no longer the largest company in the world after its latest correction, bringing the market cap back to $3 trillion, I still think it’s a bad idea to think that the company can’t continue to grow simply because of its gigantic size.
Indeed, size alone does not seem to be a barrier to growth, especially for companies like Nvidia, which seems to have taken a head start on AI. Moreover, in the field of artificial intelligence (AI) In an era where data is a precious commodity, a company’s size may be the fuel for future growth. S&P 500 is already very heavy. But it could become even heavier as the rise of AI continues.
NVDA stock is likely to continue to experience intense volatility. For those looking to mitigate this volatility, an ETF with exposure to Nvidia may be worth considering. Let’s look at three ETFs that are heavily weighted toward NVDA stock.
SPDR Technology Sector Fund (XLK)
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Selected Technology Sector SPDR Fund (NYSEARCA:XLK) is perhaps the most interesting tech ETF to watch after the great rebalancing of its main titles.
Indeed, ETF rebalances tend to be less significant. However, the XLK is still heavier than the Nasdaq 100. And it is extremely concentrated in its two largest holdings, with other individual holdings (including the third largest) typically contributing 5% or less.
Today, Microsoft (NASDAQ:MSFT) and Nvidia each account for over 20% of the XLK ETF’s holdings. Indeed, holding over 40% in just two stocks takes the portfolio’s concentration to another level.
Although Nvidia’s increased exposure comes at the expense of Apple (NASDAQ:AAPL) — which now weighs 4.5% in XLK, down from over 20% — could prove unwelcome. If the correction in NVDA stock continues while AAPL shares advance on Apple Intelligence, I think XLK is giving investors what they want. The masses want more Nvidia, and they’re going to be able to pick up a huge chunk of Microsoft stock with XLK.
VanEck Robotics Exchange Traded Fund (ETF) (IBOT)
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THE VanEck Robotics Exchange Traded Fund (ETF) (NASDAQ:IBOT) is another ETF heavily weighted toward Nvidia. Additionally, NVDA stock has a sizable but not colossal weight, typically in the single-digit percentage range. Indeed, if you like Nvidia but don’t want it to be too big for an ETF, IBOT might be more your thing.
Additionally, investors have access to interesting semiconductor equipment makers that could benefit greatly from robotic manufacturing automation. Even more intriguingly, many of these names are lesser-known global companies that are working to leverage the benefits of AI and automation in the physical world.
All things considered, the IBOT ETF looks like a diversified way to play robotics companies that go well beyond Nvidia. The greater diversification relative to XLK is a major draw for new investors who want to move away from the risk of overconcentration rather than move into it in an attempt to capture bigger gains.
VanEck Semiconductor Exchange Traded Fund (ETF) (SMH)
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VanEck Semiconductor Exchange Traded Fund (ETF) (NASDAQ:SMH) is a popular ETF for getting a quick assessment of the health of the broader semiconductor market. As you might expect, SMH shares have been in hot water lately, up more than 53% year-to-date (YTD).
Like NVDA stock, SMH has been a bit choppy this month, down about 6.5% from its all-time highs. That decline is probably nothing to worry about given that semi-performing stocks likely have years of growth ahead of them.
Despite extensive exposure to 26 participationsThe SMH, like the XLK, is very heavily weighted towards Nvidia, with the stock representing over 20% of the ETF. However, unlike the XLK, Nvidia is the only company with a weighting greater than 20%. Taiwan Semiconductors (NYSE:TSM), with a weight of 12.9%.
Indeed, both SMH and XLK look incredibly attractive if you’re looking for a passive way to play Nvidia and its peers. Depending on how you want to play the technology, both ETFs stand out in their appeal.
As of the date of publication, Joey Frenette held shares of Apple and Microsoft. The opinions expressed in this article are those of the author, subject to the advice of InvestorPlace.com Publication Guidelines.
Joey Frenette is a veteran investment writer specializing in technology and consumer stocks. A contributor to Motley Fool Canada, TipRanks, and Barchart, Joey excels at identifying mispriced stocks with long-term growth potential in a fast-moving market.