Nvidia Becomes Most Valuable Company: How to Invest in NVDA via ETFs

Nvidia becomes the world’s most valuable company

Surpassing Apple and Microsoft, the chipmaker became the world’s largest company by market capitalisation on Tuesday, symbolising the generative artificial intelligence fever that is shaking the markets.

The valuation of the Santa Clara group reached up to 3.335 trillion dollars. Nvidia’s stock gained 3.5% on Tuesday and is now up almost 174% year-to-date.

Nvidia controls roughly 80% of the market for AI chips used in data centres, a sector that has surged as companies like OpenAI, Microsoft, Alphabet, Amazon, Meta, and others scramble to acquire the processors essential for building AI models and managing increasingly large workloads.

ETFs with Large Nvidia Exposure

Nvidia’s strong market position and impressive run have significantly impacted various tech-focused and semiconductor ETFs, boosting their performance.

Take the VanEck Semiconductor ETF (SMH), for example. As of June 17, 2024, Nvidia was its top holding, making up 24.6% of the portfolio. This strong position has contributed to SMH’s impressive 58% year-to-date return.

In the broader U.S. tech space, the iShares U.S. Technology ETF (IYW) had 16.74% of its assets in Nvidia, as of June 18, 2024, second only to Microsoft (17.06%). This allocation has helped IYW achieve a solid 28% return year-to-date.

Other notable tech funds with significant exposure to Nvidia include the Vanguard Information Technology ETF (VGT) with 14% (as of May 31, 2024), and the Technology Select Sector SPDR Fund (XLK) with 6% (as of June 17, 2024).

Even broader market ETFs with substantial tech exposure, like the Invesco QQQ ETF (QQQ) and the SPDR S&P 500 ETF (SPY), hold 8.4% and 7% in Nvidia, respectively. These positions have also benefited from Nvidia’s stellar performance.

Investing in Nvidia ETF vs. Nvidia Stock?

While picking individual stocks can be rewarding, opting for ETFs that include NVDA might be a smarter choice. ETFs provide diversified exposure by holding a basket of stocks, including NVDA, which helps mitigate risk.

If NVDA underperforms, the ETF’s other holdings can cushion the impact. Given Nvidia’s high prices and hefty valuations, it’s likely wiser to choose the ETF route to spread the risk and achieve a more balanced investment portfolio.

Amplified or Income-Generating Nvidia-Focused Exposure Through ETFs

Investors seeking amplified exposure to NVDA’s performance can consider ETFs like the T-Rex 2x Long NVIDIA Daily Target ETF (NVDX), GraniteShares 2x Long NVDA Daily ETF (NVDL), or Direxion Daily NVDA Bull 2x Shares ETF (NVDU).

These ETFs aim to deliver twice the daily performance of Nvidia Corporation (NVDA) stock, adjusted for fees. If NVDA’s stock price rises by 1%, the ETF should theoretically increase by 2%, and vice versa. They use financial instruments like futures contracts or swaps to achieve this leverage.

However, these ETFs are highly volatile, riskier, and not ideal for long-term investments due to the compounding effects. Fees associated with leverage can also impact returns.

For those interested in generating income, the YieldMax NVDA Option Income Strategy ETF (NVDY) offers a different approach. Instead of owning NVDA stock, NVDY generates monthly income through options strategies, primarily by selling covered calls. This involves selling call options slightly above NVDA’s current price and collecting premiums.

While this strategy caps potential gains if NVDA’s price exceeds the strike price of the sold calls, it focuses on generating regular income. NVDY is not suited for capital appreciation and carries higher risk due to its options strategies and single-issuer focus on NVDA stock.

How to Find the Best Nvidia ETFs

If the ETFs mentioned earlier don’t catch your interest, you can use the Trackinsight Global ETF Screener to find the perfect fit for you. Whether you’re in the Americas, Europe, or Asia, the Trackinsight screener offers a database of over 10,000 ETFs and more than 25 filters to help you pinpoint the right investment.

One useful filter lets you search for ETFs with specific stock exposure, such as Nvidia. You can then sort the results by the weight of exposure, among other key performance indicators, to find the best match for your investment strategy.

Here’s a filtered list of ETFs heavily invested in Nvidia.

How to Compare Nvidia ETFs

You can leverage the Trackinsight Fund Compare tool to analyze up to 5 ETFs side-by-side on one screen. This tool allows you to compare various aspects, including fund information, expenses, performance, exposure, holdings, and risk metrics. Check out the video to see how it’s done.

Create a Custom List of Nvidia ETFs

Another option is to use the custom lists feature once you find a list of Nvidia ETFs. Though it requires a free sign-up, the process is straightforward. This feature allows you to save and customize your list, tailoring the KPI columns to track data that matters to you, such as flows and performance.

Here’s a quick demo on how it’s done.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.