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One Single Stock's Surprising Impact on the S&P 500 this Year [Video] Thumbnail

One Single Stock's Surprising Impact on the S&P 500 this Year [Video]

The S&P 500 tracks the performance of the 500 largest publicly traded companies in the U.S. This year, a unique phenomenon is impacting the S&P 500. A single stock has contributed one-third of the S&P 500’s total return.

That stock is Nvidia.  As a leading semiconductor manufacturer, the company is booming with the latest developments in Artificial Intelligence (AI).  Companies like Microsoft, Amazon, Google, and Meta are spending billions on Nvidia’s computer chips to train their AI models.  Nvidia is among the top three largest companies by market cap in the S&P 500, along with Microsoft and Apple. Due to its high index weight and strong return, Nvidia has contributed 33% of the S&P 500's year-to-date total return.

How often does one company account for such a large portion of the index’s return? The answer is rarely. Figure 1 shows the companies that contributed the most to the index’s return for each of the last few years:

Between 2016 and 2023, the stock with the most impact contributed an average of one tenth of the S&P 500’s return. The largest previous contribution occurred in 2020, when Apple contributed 23%.

Nvidia's story highlights the current technology concentration of the S&P 500, which has been a major theme over the last two years. I last wrote about it in my December 2023 posting, Tech Titians: Why Diversification Still Matters.

We currently hold Nvidia (and the rest of the Tech Titians) in client portfolios and maintain that diversified portfolios are essential for smoothing returns over time and mitigating overall investment risk.



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