Nvidia's Meteoric Rise Poses Portfolio Dilemma for Investors

Nvidia investor dilemma: how much is too much in a stock portfolio?

Investors holding large positions in Nvidia face heightened risk as the stock's impressive gains may lead to potential losses. The AI company's soaring shares have driven portfolio returns, but concerns linger over its rich valuation and market competition. Will Nvidia's rally continue or face a downturn?Outsized positions in artificial intelligence darling Nvidia have boosted portfolio managers' returns this year but the bets stand to magnify risk if the chipmaker's red-hot shares see a reversal of fortune. Nvidia shares are up about 785% since the start of 2023 and have risen some 160% this year alone, boosted by demand for its chips, seen as the gold standard in the AI field. Nvidia briefly became the world's most valuable company in June before a dip in its shares returned that title to Microsoft. Asset managers' holdings of the chipmaker have swelled alongside its stock price. Morningstar data showed that 355 actively managed funds held Nvidia positions that totaled 5% or more of their assets at the end of the first quarter, compared to just 108 funds in the same period last year. Funds can maintain large positions in a single holding for a variety of reasons, whether to maximize profits or to track a stock's weight in an index to which the fund is benchmarked. "There's a mindset among some portfolio managers that they missed the boat on Apple or Microsoft and they don't want to be wrong on AI," said Jack Shannon, a senior Morningstar analyst. "They don't want to sell." The oversized positions in Nvidia are another example of how investors have cast their lots with a handful of massive growth stocks, leading to one of the most concentrated market advances ever. Nvidia alone has accounted for around a third of the S&P 500's nearly 17% gain this year, according to S&P Dow Jones Indices. Overall, markets are the third-narrowest since 1986, with only 24% of stocks in the S&P 500 outperforming the index in the first half, according to BofA Global Research strategists. Funds that owned Nvidia have so far reaped the benefits. Actively-managed U.S. equity funds that held the stock were up 16.3% on average over the first six months of 2024, compared with an average 5.7% return among those that did not own Nvidia, Morningstar data showed. Yet concentration in a single stock can hurt investors if Nvidia shares hit a rough patch. While the average price target for the stock among analysts stands at $133.45, some 3% above its current level, according to LSEG data, some market participants point to increasing competition, an expected balance between supply and demand as Nvidia ramps up production, and the company's rich valuation as possible reasons for a downturn. The stock trades at 39.3 times forward earnings, about 50% more than its industry median, according to LSEG. "Does having 6% or more of your portfolio in one stock create outsized risks? The answer is obviously, yes," said Phil Orlando, chief equity market strategist at Federated Hermes. "The fact that one stock did take off like a rocket ship doesn't mean that it was smart ... to have that many eggs in one basket." Investors got a taste of how concentrated positions can be a two-way street last week, following a sharp, one-day rotation out of Big Tech stocks sparked by cooler inflation data. Nvidia fell nearly 6% on Thursday, its biggest daily drop in more than two weeks, while the tech-heavy Nasdaq 100 lost about 2.2%. Both pared those losses the following day. 'TWINGE OF REGRET' Technology-sector funds overall have the largest weightings in Nvidia, with four Fidelity funds each holding more than 18% of their assets in the stock, according to Morningstar. Yet other, more diversified, funds appear to be taking on similar risks, with the Baron Fifth Avenue Growth fund holding nearly 15% of its portfolio in Nvidia and the Fidelity Blue Chip Growth fund holding about 13% of its portfolio in the stock. Both firms declined to comment. Anthony Zackery, a portfolio manager at Zevenbergen Capital Investments, has owned Nvidia since 2016 and continues to maintain a core position, though he has trimmed it periodically to keep within his firm's risk-tolerance guidelines. The fund can hold as much as 13% of one stock in growth portfolios to keep in line with weightings in its benchmark, the Russell 3000 Growth Index. "This is a company that is at the forefront of the next trend in technology," he said. Some who sold out entirely, on the other hand, wish they had held on longer. Kevin Landis, chief investment officer at Firsthand Capital Management, said he was "prudent" and took profits in 2020 in a Nvidia position he owned for several years. Still, he can't help thinking about the gains he missed out on. "I can't look at any of my screens now without feeling a twinge of regret," he said.

Nvidia investor dilemma: how much is too much in a stock portfolio?

NEW YORK, July 15 (Reuters) - Outsized positions in artificial intelligence darling Nvidia (NVDA.O)New Tab, opens new tab have boosted portfolio managers' returns this year but the bets stand to magnify risk if the chipmaker's red-hot shares see a reversal of fortune. Nvidia shares are up about 785% since the start of 2023 and have risen some 160% this year alone, boosted by demand for its chips, seen as the gold standard in the AI field. Nvidia briefly became the world's most valuable company in June before a dip in its shares returned that title to Microsoft. Asset managers' holdings of the chipmaker have swelled alongside its stock price. Morningstar data showed that 355 actively managed funds held Nvidia positions that totaled 5% or more of their assets at the end of the first quarter, compared to just 108 funds in the same period last year. Funds can maintain large positions in a single holding for a variety of reasons, whether to maximize profits or to track a stock's weight in an index to which the fund is benchmarked. "There's a mindset among some portfolio managers that they missed the boat on Apple or Microsoft and they don't want to be wrong on AI," said Jack Shannon, a senior Morningstar analyst. "They don't want to sell." The oversized positions in Nvidia are another example of how investors have cast their lots with a handful of massive growth stocks, leading to one of the most concentrated market advances ever. Nvidia alone has accounted for around a third of the S&P 500's nearly 17% gain this year, according to S&P Dow Jones Indices. Overall, markets are the third-narrowest since 1986, with only 24% of stocks in the S&P 500 outperforming the index in the first half, according to BofA Global Research strategists. Funds that owned Nvidia have so far reaped the benefits. Actively-managed U.S. equity funds that held the stock were up 16.3% on average over the first six months of 2024, compared with an average 5.7% return among those that did not own Nvidia, Morningstar data showed. Yet concentration in a single stock can hurt investors if Nvidia shares hit a rough patch. While the average price target for the stock among analysts stands at $133.45, some 3% above its current level, according to LSEG data, some market participants point to increasing competition, an expected balance between supply and demand as Nvidia ramps up production, and the company's rich valuation as possible reasons for a downturn. The stock trades at 39.3 times forward earnings, about 50% more than its industry median, according to LSEG. "Does having 6% or more of your portfolio in one stock create outsized risks? The answer is obviously, yes," said Phil Orlando, chief equity market strategist at Federated Hermes. "The fact that one stock did take off like a rocket ship doesn't mean that it was smart ... to have that many eggs in one basket." Investors got a taste of how concentrated positions can be a two-way street last week, following a sharp, one-day rotation out of Big Tech stocks sparked by cooler inflation data. Nvidia fell nearly 6% on Thursday, its biggest daily drop in more than two weeks, while the tech-heavy Nasdaq 100 lost about 2.2%. Both pared those losses the following day. 'TWINGE OF REGRET' Technology-sector funds overall have the largest weightings in Nvidia, with four Fidelity funds each holding more than 18% of their assets in the stock, according to Morningstar. Yet other, more diversified, funds appear to be taking on similar risks, with the Baron Fifth Avenue Growth fund holding nearly 15% of its portfolio in Nvidia and the Fidelity Blue Chip Growth fund holding about 13% of its portfolio in the stock. Both firms declined to comment. Anthony Zackery, a portfolio manager at Zevenbergen Capital Investments, has owned Nvidia since 2016 and continues to maintain a core position, though he has trimmed it periodically to keep within his firm's risk-tolerance guidelines. The fund can hold as much as 13% of one stock in growth portfolios to keep in line with weightings in its benchmark, the Russell 3000 Growth Index. "This is a company that is at the forefront of the next trend in technology," he said. Some who sold out entirely, on the other hand, wish they had held on longer. Kevin Landis, chief investment officer at Firsthand Capital Management, said he was "prudent" and took profits in 2020 in a Nvidia position he owned for several years. Still, he can't help thinking about the gains he missed out on. "I can't look at any of my screens now without feeling a twinge of regret," he said. Reporting by David Randall; Editing by Ira Iosebashvili and Rod Nickel

Nvidia investor dilemma: how much is too much in a stock portfolio?

* Funds' Nvidia positions have grown as the stock has soared, increasing risk * US equity markets are increasingly powered by handful of giant tech stocks * Actively managed funds that held Nvidia trounced peers that didn't hold it so far this year NEW YORK, July 15 (Reuters) - Outsized positions in artificial intelligence darling Nvidia have boosted portfolio managers' returns this year but the bets stand to magnify risk if the chipmaker's red-hot shares see a reversal of fortune. Nvidia shares are up about 785% since the start of 2023 and have risen some 160% this year alone, boosted by demand for its chips, seen as the gold standard in the AI field. Nvidia briefly became the world's most valuable company in June before a dip in its shares returned that title to Microsoft. Asset managers' holdings of the chipmaker have swelled alongside its stock price. Morningstar data showed that 355 actively managed funds held Nvidia positions that totaled 5% or more of their assets at the end of the first quarter, compared to just 108 funds in the same period last year. Funds can maintain large positions in a single holding for a variety of reasons, whether to maximize profits or to track a stock's weight in an index to which the fund is benchmarked. "There's a mindset among some portfolio managers that they missed the boat on Apple or Microsoft and they don't want to be wrong on AI," said Jack Shannon, a senior Morningstar analyst. "They don't want to sell." The oversized positions in Nvidia are another example of how investors have cast their lots with a handful of massive growth stocks, leading to one of the most concentrated market advances ever. Nvidia alone has accounted for around a third of the S&P 500's nearly 17% gain this year, according to S&P Dow Jones Indices. Overall, markets are the third-narrowest since 1986, with only 24% of stocks in the S&P 500 outperforming the index in the first half, according to BofA Global Research strategists. Funds that owned Nvidia have so far reaped the benefits. Actively-managed U.S. equity funds that held the stock were up 16.3% on average over the first six months of 2024, compared with an average 5.7% return among those that did not own Nvidia, Morningstar data showed. Yet concentration in a single stock can hurt investors if Nvidia shares hit a rough patch. While the average price target for the stock among analysts stands at $133.45, some 3% above its current level, according to LSEG data, some market participants point to increasing competition, an expected balance between supply and demand as Nvidia ramps up production, and the company's rich valuation as possible reasons for a downturn. The stock trades at 39.3 times forward earnings, about 50% more than its industry median, according to LSEG. "Does having 6% or more of your portfolio in one stock create outsized risks? The answer is obviously, yes," said Phil Orlando, chief equity market strategist at Federated Hermes. "The fact that one stock did take off like a rocket ship doesn't mean that it was smart ... to have that many eggs in one basket." Investors got a taste of how concentrated positions can be a two-way street last week, following a sharp, one-day rotation out of Big Tech stocks sparked by cooler inflation data. Nvidia fell nearly 6% on Thursday, its biggest daily drop in more than two weeks, while the tech-heavy Nasdaq 100 lost about 2.2%. Both pared those losses the following day. 'TWINGE OF REGRET' Technology-sector funds overall have the largest weightings in Nvidia, with four Fidelity funds each holding more than 18% of their assets in the stock, according to Morningstar. Yet other, more diversified, funds appear to be taking on similar risks, with the Baron Fifth Avenue Growth fund holding nearly 15% of its portfolio in Nvidia and the Fidelity Blue Chip Growth fund holding about 13% of its portfolio in the stock. Both firms declined to comment. Anthony Zackery, a portfolio manager at Zevenbergen Capital Investments, has owned Nvidia since 2016 and continues to maintain a core position, though he has trimmed it periodically to keep within his firm's risk-tolerance guidelines. The fund can hold as much as 13% of one stock in growth portfolios to keep in line with weightings in its benchmark, the Russell 3000 Growth Index. "This is a company that is at the forefront of the next trend in technology," he said. Some who sold out entirely, on the other hand, wish they had held on longer. Kevin Landis, chief investment officer at Firsthand Capital Management, said he was "prudent" and took profits in 2020 in a Nvidia position he owned for several years. Still, he can't help thinking about the gains he missed out on. "I can't look at any of my screens now without feeling a twinge of regret," he said. (Reporting by David Randall; Editing by Ira Iosebashvili and Rod Nickel)

Nvidia investor dilemma: how much is too much in a stock portfolio?

NEW YORK - Outsized positions in artificial intelligence darling Nvidia have boosted portfolio managers' returns this year but the bets stand to magnify risk if the chipmaker's red-hot shares see a reversal of fortune. Nvidia shares are up about 785% since the start of 2023 and have risen some 160% this year alone, boosted by demand for its chips, seen as the gold standard in the AI field. Nvidia briefly became the world's most valuable company in June before a dip in its shares returned that title to Microsoft. Asset managers' holdings of the chipmaker have swelled alongside its stock price. Morningstar data showed that 355 actively managed funds held Nvidia positions that totaled 5% or more of their assets at the end of the first quarter, compared to just 108 funds in the same period last year. Funds can maintain large positions in a single holding for a variety of reasons, whether to maximize profits or to track a stock's weight in an index to which the fund is benchmarked. "There's a mindset among some portfolio managers that they missed the boat on Apple or Microsoft and they don't want to be wrong on AI," said Jack Shannon, a senior Morningstar analyst. "They don't want to sell." The oversized positions in Nvidia are another example of how investors have cast their lots with a handful of massive growth stocks, leading to one of the most concentrated market advances ever. Nvidia alone has accounted for around a third of the S&P 500's nearly 17% gain this year, according to S&P Dow Jones Indices. Overall, markets are the third-narrowest since 1986, with only 24% of stocks in the S&P 500 outperforming the index in the first half, according to BofA Global Research strategists. Funds that owned Nvidia have so far reaped the benefits. Actively-managed U.S. equity funds that held the stock were up 16.3% on average over the first six months of 2024, compared with an average 5.7% return among those that did not own Nvidia, Morningstar data showed. Yet concentration in a single stock can hurt investors if Nvidia shares hit a rough patch. While the average price target for the stock among analysts stands at $133.45, some 3% above its current level, according to LSEG data, some market participants point to increasing competition, an expected balance between supply and demand as Nvidia ramps up production, and the company's rich valuation as possible reasons for a downturn. The stock trades at 39.3 times forward earnings, about 50% more than its industry median, according to LSEG. "Does having 6% or more of your portfolio in one stock create outsized risks? The answer is obviously, yes," said Phil Orlando, chief equity market strategist at Federated Hermes. "The fact that one stock did take off like a rocket ship doesn't mean that it was smart ... to have that many eggs in one basket." Investors got a taste of how concentrated positions can be a two-way street last week, following a sharp, one-day rotation out of Big Tech stocks sparked by cooler inflation data. Nvidia fell nearly 6% on Thursday, its biggest daily drop in more than two weeks, while the tech-heavy Nasdaq 100 lost about 2.2%. Both pared those losses the following day. 'TWINGE OF REGRET' Technology-sector funds overall have the largest weightings in Nvidia, with four Fidelity funds each holding more than 18% of their assets in the stock, according to Morningstar. Yet other, more diversified, funds appear to be taking on similar risks, with the Baron Fifth Avenue Growth fund holding nearly 15% of its portfolio in Nvidia and the Fidelity Blue Chip Growth fund holding about 13% of its portfolio in the stock. Both firms declined to comment. Anthony Zackery, a portfolio manager at Zevenbergen Capital Investments, has owned Nvidia since 2016 and continues to maintain a core position, though he has trimmed it periodically to keep within his firm's risk-tolerance guidelines. The fund can hold as much as 13% of one stock in growth portfolios to keep in line with weightings in its benchmark, the Russell 3000 Growth Index. "This is a company that is at the forefront of the next trend in technology," he said. Some who sold out entirely, on the other hand, wish they had held on longer. Kevin Landis, chief investment officer at Firsthand Capital Management, said he was "prudent" and took profits in 2020 in a Nvidia position he owned for several years. Still, he can't help thinking about the gains he missed out on. "I can't look at any of my screens now without feeling a twinge of regret," he said. (Reporting by David Randall; Editing by Ira Iosebashvili and Rod Nickel)

Nvidia investor dilemma: how much is too much in a stock portfolio?

Outsized positions in artificial intelligence darling Nvidia have boosted portfolio managers' returns this year but the bets stand to magnify risk if the chipmaker's red-hot shares see a reversal of fortune. Nvidia shares are up about 785% since the start of 2023 and have risen some 160% this year alone, boosted by demand for its chips, seen as the gold standard in the AI field. Nvidia briefly became the world's most valuable company in June before a dip in its shares returned that title to Microsoft. Asset managers' holdings of the chipmaker have swelled alongside its stock price. Morningstar data showed that 355 actively managed funds held Nvidia positions that totaled 5% or more of their assets at the end of the first quarter, compared to just 108 funds in the same period last year. Funds can maintain large positions in a single holding for a variety of reasons, whether to maximize profits or to track a stock's weight in an index to which the fund is benchmarked. "There's a mindset among some portfolio managers that they missed the boat on Apple or Microsoft and they don't want to be wrong on AI," said Jack Shannon, a senior Morningstar analyst. "They don't want to sell." (For top technology news of the day, subscribe to our tech newsletter Today's Cache) The oversized positions in Nvidia are another example of how investors have cast their lots with a handful of massive growth stocks, leading to one of the most concentrated market advances ever. Nvidia alone has accounted for around a third of the S&P 500's nearly 17% gain this year, according to S&P Dow Jones Indices. Overall, markets are the third-narrowest since 1986, with only 24% of stocks in the S&P 500 outperforming the index in the first half, according to BofA Global Research strategists. Funds that owned Nvidia have so far reaped the benefits. Actively-managed U.S. equity funds that held the stock were up 16.3% on average over the first six months of 2024, compared with an average 5.7% return among those that did not own Nvidia, Morningstar data showed. Yet concentration in a single stock can hurt investors if Nvidia shares hit a rough patch. While the average price target for the stock among analysts stands at $133.45, some 3% above its current level, according to LSEG data, some market participants point to increasing competition, an expected balance between supply and demand as Nvidia ramps up production, and the company's rich valuation as possible reasons for a downturn. The stock trades at 39.3 times forward earnings, about 50% more than its industry median, according to LSEG. "Does having 6% or more of your portfolio in one stock create outsized risks? The answer is obviously, yes," said Phil Orlando, chief equity market strategist at Federated Hermes. "The fact that one stock did take off like a rocket ship doesn't mean that it was smart ... to have that many eggs in one basket." Investors got a taste of how concentrated positions can be a two-way street last week, following a sharp, one-day rotation out of Big Tech stocks sparked by cooler inflation data. Nvidia fell nearly 6% on Thursday, its biggest daily drop in more than two weeks, while the tech-heavy Nasdaq 100 lost about 2.2%. Both pared those losses the following day. 'TWINGE OF REGRET' Technology-sector funds overall have the largest weightings in Nvidia, with four Fidelity funds each holding more than 18% of their assets in the stock, according to Morningstar. Yet other, more diversified, funds appear to be taking on similar risks, with the Baron Fifth Avenue Growth fund holding nearly 15% of its portfolio in Nvidia and the Fidelity Blue Chip Growth fund holding about 13% of its portfolio in the stock. Both firms declined to comment. Anthony Zackery, a portfolio manager at Zevenbergen Capital Investments, has owned Nvidia since 2016 and continues to maintain a core position, though he has trimmed it periodically to keep within his firm's risk-tolerance guidelines. The fund can hold as much as 13% of one stock in growth portfolios to keep in line with weightings in its benchmark, the Russell 3000 Growth Index. "This is a company that is at the forefront of the next trend in technology," he said. Some who sold out entirely, on the other hand, wish they had held on longer. Kevin Landis, chief investment officer at Firsthand Capital Management, said he was "prudent" and took profits in 2020 in a Nvidia position he owned for several years. Still, he can't help thinking about the gains he missed out on. "I can't look at any of my screens now without feeling a twinge of regret," he said. Read Comments

Analysis-Nvidia investor dilemma: how much is too much in a stock portfolio?

Asset managers' holdings of the chipmaker have swelled alongside its stock price. Morningstar data showed that 355 actively managed funds held Nvidia positions that totaled 5% or more of their assets at the end of the first quarter, compared to just 108 funds in the same period last year. Funds can maintain large positions in a single holding for a variety of reasons, whether to maximize profits or to track a stock's weight in an index to which the fund is benchmarked. "There's a mindset among some portfolio managers that they missed the boat on Apple or Microsoft and they don't want to be wrong on AI," said Jack Shannon, a senior Morningstar analyst. "They don't want to sell." The oversized positions in Nvidia are another example of how investors have cast their lots with a handful of massive growth stocks, leading to one of the most concentrated market advances ever. Nvidia alone has accounted for around a third of the S&P 500's nearly 17% gain this year, according to S&P Dow Jones Indices. Overall, markets are the third-narrowest since 1986, with only 24% of stocks in the S&P 500 outperforming the index in the first half, according to BofA Global Research strategists. Funds that owned Nvidia have so far reaped the benefits. Actively-managed U.S. equity funds that held the stock were up 16.3% on average over the first six months of 2024, compared with an average 5.7% return among those that did not own Nvidia, Morningstar data showed. Yet concentration in a single stock can hurt investors if Nvidia shares hit a rough patch. While the average price target for the stock among analysts stands at $133.45, some 3% above its current level, according to LSEG data, some market participants point to increasing competition, an expected balance between supply and demand as Nvidia ramps up production, and the company's rich valuation as possible reasons for a downturn. The stock trades at 39.3 times forward earnings, about 50% more than its industry median, according to LSEG. "Does having 6% or more of your portfolio in one stock create outsized risks? The answer is obviously, yes," said Phil Orlando, chief equity market strategist at Federated Hermes. "The fact that one stock did take off like a rocket ship doesn't mean that it was smart ... to have that many eggs in one basket." Investors got a taste of how concentrated positions can be a two-way street last week, following a sharp, one-day rotation out of Big Tech stocks sparked by cooler inflation data. Nvidia fell nearly 6% on Thursday, its biggest daily drop in more than two weeks, while the tech-heavy Nasdaq 100 lost about 2.2%. Both pared those losses the following day. Technology-sector funds overall have the largest weightings in Nvidia, with four Fidelity funds each holding more than 18% of their assets in the stock, according to Morningstar. Yet other, more diversified, funds appear to be taking on similar risks, with the Baron Fifth Avenue Growth fund holding nearly 15% of its portfolio in Nvidia and the Fidelity Blue Chip Growth fund holding about 13% of its portfolio in the stock. Both firms declined to comment. Anthony Zackery, a portfolio manager at Zevenbergen Capital Investments, has owned Nvidia since 2016 and continues to maintain a core position, though he has trimmed it periodically to keep within his firm's risk-tolerance guidelines. The fund can hold as much as 13% of one stock in growth portfolios to keep in line with weightings in its benchmark, the Russell 3000 Growth Index. "This is a company that is at the forefront of the next trend in technology," he said. Some who sold out entirely, on the other hand, wish they had held on longer. Kevin Landis, chief investment officer at Firsthand Capital Management, said he was "prudent" and took profits in 2020 in a Nvidia position he owned for several years. Still, he can't help thinking about the gains he missed out on. "I can't look at any of my screens now without feeling a twinge of regret," he said. (Reporting by David Randall; Editing by Ira Iosebashvili and Rod Nickel)

Nvidia investor dilemma: how much is too much in a stock portfolio? - ET Telecom

Devices 4 min read Nvidia investor dilemma: how much is too much in a stock portfolio? "There's a mindset among some portfolio managers that they missed the boat on Apple or Microsoft and they don't want to be wrong on AI," said Jack Shannon, a senior Morningstar analyst. "They don't want to sell." By David Randall NEW YORK: Outsized positions in artificial intelligence darling Nvidia have boosted portfolio managers' returns this year but the bets stand to magnify risk if the chipmaker's red-hot shares see a reversal of fortune. Nvidia shares are up about 785% since the start of 2023 and have risen some 160% this year alone, boosted by demand for its chips, seen as the gold standard in the AI field. Nvidia briefly became the world's most valuable company in June before a dip in its shares returned that title to Microsoft. Asset managers' holdings of the chipmaker have swelled alongside its stock price. Morningstar data showed that 355 actively managed funds held Nvidia positions that totaled 5% or more of their assets at the end of the first quarter, compared to just 108 funds in the same period last year. Funds can maintain large positions in a single holding for a variety of reasons, whether to maximize profits or to track a stock's weight in an index to which the fund is benchmarked. "There's a mindset among some portfolio managers that they missed the boat on Apple or Microsoft and they don't want to be wrong on AI," said Jack Shannon, a senior Morningstar analyst. "They don't want to sell." The oversized positions in Nvidia are another example of how investors have cast their lots with a handful of massive growth stocks, leading to one of the most concentrated market advances ever. Nvidia alone has accounted for around a third of the S&P 500's nearly 17% gain this year, according to S&P Dow Jones Indices. Overall, markets are the third-narrowest since 1986, with only 24% of stocks in the S&P 500 outperforming the index in the first half, according to BofA Global Research strategists. Funds that owned Nvidia have so far reaped the benefits. Actively-managed U.S. equity funds that held the stock were up 16.3% on average over the first six months of 2024, compared with an average 5.7% return among those that did not own Nvidia, Morningstar data showed. Yet concentration in a single stock can hurt investors if Nvidia shares hit a rough patch. While the average price target for the stock among analysts stands at $133.45, some 3% above its current level, according to LSEG data, some market participants point to increasing competition, an expected balance between supply and demand as Nvidia ramps up production, and the company's rich valuation as possible reasons for a downturn. The stock trades at 39.3 times forward earnings, about 50% more than its industry median, according to LSEG. "Does having 6% or more of your portfolio in one stock create outsized risks? The answer is obviously, yes," said Phil Orlando, chief equity market strategist at Federated Hermes. "The fact that one stock did take off like a rocket ship doesn't mean that it was smart ... to have that many eggs in one basket." Investors got a taste of how concentrated positions can be a two-way street last week, following a sharp, one-day rotation out of Big Tech stocks sparked by cooler inflation data. Nvidia fell nearly 6% on Thursday, its biggest daily drop in more than two weeks, while the tech-heavy Nasdaq 100 lost about 2.2%. Both pared those losses the following day. 'TWINGE OF REGRET' Technology-sector funds overall have the largest weightings in Nvidia, with four Fidelity funds each holding more than 18% of their assets in the stock, according to Morningstar. Yet other, more diversified, funds appear to be taking on similar risks, with the Baron Fifth Avenue Growth fund holding nearly 15% of its portfolio in Nvidia and the Fidelity Blue Chip Growth fund holding about 13% of its portfolio in the stock. Both firms declined to comment. Anthony Zackery, a portfolio manager at Zevenbergen Capital Investments, has owned Nvidia since 2016 and continues to maintain a core position, though he has trimmed it periodically to keep within his firm's risk-tolerance guidelines. The fund can hold as much as 13% of one stock in growth portfolios to keep in line with weightings in its benchmark, the Russell 3000 Growth Index. "This is a company that is at the forefront of the next trend in technology," he said. Some who sold out entirely, on the other hand, wish they had held on longer. Kevin Landis, chief investment officer at Firsthand Capital Management, said he was "prudent" and took profits in 2020 in a Nvidia position he owned for several years. Still, he can't help thinking about the gains he missed out on. "I can't look at any of my screens now without feeling a twinge of regret," he said.

Nvidia's Stock Surge Raises Concentration Risks For Investors, Warns Analyst: Not 'Smart...To Have That Many Eggs In One Basket'' - NVIDIA (NASDAQ:NVDA)

Investors have been riding high on the wave of Nvidia Corp's NVDA soaring stock, but the outsized positions could spell risk if the chipmaker's shares take a downturn. What Happened: Led by Jensen Huang, Nvidia shares have seen a staggering 785% increase since the start of 2023, with a 160% rise this year alone. The surge is attributed to the high demand for Nvidia's chips, considered the gold standard in the AI field. Asset managers have increased their holdings of Nvidia as its stock price has surged. Data from Morningstar reveals that 355 actively managed funds held Nvidia positions that accounted for 5% or more of their assets at the end of the first quarter of 2024, a significant increase from 108 funds in the same period last year. However, the concentration in Nvidia shares could pose a risk to investors if the stock hits a rough patch, Reuters reported on Monday. Despite the average price target for the stock standing at $133.45, some market participants point to increasing competition, an expected balance between supply and demand as Nvidia ramps up production, and the company's rich valuation as potential reasons for a downturn. "Does having 6% or more of your portfolio in one stock create outsized risks? The answer is obviously, yes," said Phil Orlando of Federated Hermes. See Also: The Market Did Something Thursday That Has Only Occurred 4 Times In History "The fact that one stock did take off like a rocket ship doesn't mean that it was smart ... to have that many eggs in one basket." Technology-sector funds overall have the largest weightings in Nvidia, with four Fidelity funds each holding more than 18% of their assets in the stock. Other diversified funds are also taking on similar risks, with the Baron Fifth Avenue Growth fund holding nearly 15% of its portfolio in Nvidia and the Fidelity Blue Chip Growth fund holding about 13% of its portfolio in the stock. Some people who have sold all their stocks regret not holding on for longer. For example, Kevin Landis, the chief investment officer at Firsthand Capital Management, sold his Nvidia position in 2020 after owning it for several years, and although he believes it was a wise decision, he still wishes he had held on for longer to benefit from the potential gains. Kevin Landis, chief investment officer at Firsthand Capital Management, said he was "prudent" and took profits in 2020 in a Nvidia position he owned for several years. Still, he can't help thinking about the gains he missed out on. "I can't look at any of my screens now without feeling a twinge of regret," he said. Why It Matters: James Anderson, an early investor in companies like Tesla and Amazon, recently predicted that Nvidia could achieve a market capitalization of nearly $50 trillion within the next decade. His optimism is rooted in Nvidia's role in the growing demand for AI chips. However, not everyone shares this bullish outlook. Ed Yardeni, President of Yardeni Research, warned that the AI market might be inflating into a bubble. Additionally, Ed Egilinsky, Managing Director at Direxion, expressed concerns about Nvidia's high valuation. Price Action: On Monday, Nvidia's stock was trading 0.57% lower at $128.50 at the time of writing, according to Benzinga Pro. Read Next: Apple, Nvidia, Palantir, MicroStrategy And Shiba Inu's Ambitious Trillion-Dollar Vision: Benzinga Bulls Ambitious Trillion-Dollar Vision Image via Shutterstock This story was generated using Benzinga Neuro and edited by Pooja Rajkumari Market News and Data brought to you by Benzinga APIs

Nvidia investor dilemma: How much is too much in a stock portfolio?

Nvidia shares are up about 785 per cent since the start of 2023 and have risen some 160 per cent this year alone, boosted by demand for its chips, seen as the gold standard in the AI field. Nvidia briefly became the world's most valuable company in June before a dip in its shares returned that title to Microsoft. Asset managers" holdings of the chipmaker have swelled alongside its stock price. Morningstar data showed that 355 actively managed funds held Nvidia positions that totaled 5 per cent or more of their assets at the end of the first quarter, compared to just 108 funds in the same period last year. Funds can maintain large positions in a single holding for a variety of reasons, whether to maximise profits or to track a stock"s weight in an index to which the fund is benchmarked.

Cathie Wood Admits In A Deleted Post That She Had No Idea The Market Would Reward NVIDIA So Overwhelmingly

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy. Back in 2022, the star portfolio manager of ARK Invest, Cathie Wood, had ruffled feathers by boldly declaring that her flagship ARK Innovation ETF (ARKK) will record a 50 percent CAGR over the next 5 years. Fast forward to 2024, and ARKK is down by around 5 percent so far this year, constituting a monumental deviation relative to Cathie Wood's tall claims. The reason behind this divergence: the absence of NVIDIA. The above snippet details the top holdings of ARK Innovation Fund ETF. The absence of NVIDIA in this portfolio has acted as a phenomenal drag on the ETF's recent performance. After all, NVIDIA shares are currently up 168 percent so far this year. Of course, Cathie Wood is known for her quixotic market timing style, which involves selling runners to buy laggards. This style, however, does not work in a market characterized by a very narrow breadth, as is the case at present. By selling NVIDIA early and refusing to let her "runner" holdings actually run, Wood eliminated a major source of alpha for her flagship ETF. This brings us to the crux of the matter. In a deleted thread on X, Cathie Wood admitted that had she known the market would reward NVIDIA to the "exclusion of stocks that will be prime beneficiaries of AI," she would not have sold it. Well, everyone is sure to have a 20/20 vision in hindsight. Alpha generation is all about foresight, something that Cathie Wood materially lacked in this instance at least. Meanwhile, as per the latest reporting out of Asia, NVIDIA has increased its 4nm-based chip orders with TSMC by 25 percent. The company expects to deliver around 60,000 units of the GB200 NVL72 and the GB200 NVL36 servers, priced at $3 million and $1.8 million per unit respectively. As we noted recently, the AI GPU supply chain has seen massive improvements within the past few quarters, all thanks to NVIDIA's efforts in upscaling the GPU supply chain by adding new partners and demanding suppliers to enhance existing production facilities.