Artificial intelligence chip manufacturer$NVIDIA (NVDA.US)$The market value of NVIDIA surpassed $3 trillion in the second quarter. Because chips are made of silicon, it is easy to think that the entire market value of NVIDIA is based on sand. But few on Wall Street are more bullish on artificial intelligence, and the stock price of the tech giant has skyrocketed 37% in the past three months and nearly 200% in the past year. On the product structure side, 10-30 billion yuan products operating income is 401/1288/60 million yuan respectively.
The problem facing fund managers now is whether this is a bubble. NVIDIA's $3 trillion market value is higher than Sweden's $2.3 trillion net assets (all assets minus all liabilities) with a population of 10.5 million, which is almost equivalent to Africa's $3.1 trillion GDP in 2023. NVIDIA has 29,600 employees, and each employee is currently worth more than $100 million on average.
Most of the funds that have avoided or reduced holdings of NVIDIA and other AI-related stocks have lagged behind in the past quarter, while funds that have increased holdings of these stocks have performed well. Therefore, it is not surprising that ProFunds Semiconductor UltraSector, which invests in NVIDIA and other chip stocks with a 150% leverage ratio, became the best-performing mutual fund this quarter. This quarter, the fund's gains were 31%, and its gains for the full year 2024 will be 108%. The best performing ETF fund this quarter is Dision Daily NVDA Bull 2X, which invests in NVIDIA with double leverage. The fund rose 69% this quarter and is expected to rise more than 300% in 2024.
Anyone who believes that this strong performance can continue indefinitely should check whether they hold AI chip stocks. However, given that Wall Street hopes to replace all humans with cheaper and more efficient machines, and these machines will not cry when they are laid off, we must take the trend of artificial intelligence seriously.
However, given that Wall Street hopes to replace all humans with cheaper and more efficient machines, and these machines will not cry when they are laid off, we must take the trend of artificial intelligence seriously.
Both buyers and sellers of NVIDIA have excellent funds. Morningstar's data shows that the Vanguard Wellington balanced fund with a size of $111 billion first established a position in NVIDIA in March of this year. Although it accounts for only 1.5% of its portfolio, this is a significant proportion for the highly diversified fund and also one of the largest in history. Daniel Pozen, who manages the stock portion of the fund, consciously tried to get rid of the fund's previously value-oriented strategy. Nothing is more indicative of growth than NVIDIA.
T.Rowe Price Capital Appreciation is managed by the best balanced fund manager David Giroux. Morningstar's data shows that the fund has started to reduce its holdings of NVIDIA's stocks and reduced them by 26% in the first quarter of 2024. Giroux pointed out in the fund's latest annual report released in December last year that although they currently hold NVIDIA's stocks, the potential range of outcomes is quite large, and in their opinion, this is not the best risk-adjusted way to invest in artificial intelligence. The fund's latest disclosed NVIDIA weighting is 1.9%.
The biggest beneficiary of the diversification stock fund in the AI boom is the large-cap growth stock fund. It has risen by an average of 4.9% this quarter and 17.6% so far in 2024. The best performing mutual fund this quarter is HCM Tactical Growth, which rose 11.6%, but its expense ratio is as high as 2.63% and often invests in ETF tools such as ProShares Ultra QQQ. For most investors, its risks are too high and its pricing is too high.
What is more interesting is the $32 billion Fidelity OTC Fund, which had a return rate of 10.4% last quarter. Its weighting on NVIDIA increased from 8.7% on April 30th to 10.8% on May 31st. This exceeds the benchmark for every active management growth stock fund manager, including the $285 billion
Fidelity Contrafund, which tracks the
The market value of NVIDIA surpassed $3 trillion in the second quarter. Because chips are made of silicon, it is easy to think that the entire market value of NVIDIA is based on sand. But few on Wall Street are more bullish on artificial intelligence, and the stock price of the tech giant has skyrocketed 37% in the past three months and nearly 200% in the past year. On the product structure side, 10-30 billion yuan products operating income is 401/1288/60 million yuan respectively.
The problem facing fund managers now is whether this is a bubble. NVIDIA's $3 trillion market value is higher than Sweden's $2.3 trillion net assets (all assets minus all liabilities) with a population of 10.5 million, which is almost equivalent to Africa's $3.1 trillion GDP in 2023. NVIDIA has 29,600 employees, and each employee is currently worth more than $100 million on average.$Invesco QQQ Trust (QQQ.US)$Most of the funds that have avoided or reduced holdings of NVIDIA and other AI-related stocks have lagged behind in the past quarter, while funds that have increased holdings of these stocks have performed well. Therefore, it is not surprising that ProFunds Semiconductor UltraSector, which invests in NVIDIA and other chip stocks with a 150% leverage ratio, became the best-performing mutual fund this quarter. This quarter, the fund's gains were 31%, and its gains for the full year 2024 will be 108%. The best performing ETF fund this quarter is Dision Daily NVDA Bull 2X, which invests in NVIDIA with double leverage. The fund rose 69% this quarter and is expected to rise more than 300% in 2024.$NASDAQ 100 Index (.NDX.US)$It is one of the few large-cap growth stock funds that can compete with the Nasdaq 100 ETF in the long term. Its gain this year is 24.9%, while the gain of the Nasdaq 100 ETF is 17.3%. However, the 10-year annualized return rate of Fidelity OTC Fund is 17.9%, still lagging behind the incredible 18.7% of the QQQ.
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Perhaps more attractive than the Fidelity OTC Fund is the Vanguard Primecap Fund, which has a size of $76 billion and reopened to new investors this quarter after being closed for 20 years. Morningstar classifies it as a large-cap mixed fund, although it is more like a growth stock fund.
The fund's holdings in Nvidia are only 1.8%, but it has recently performed well because of its weighting of 12.7% in $Eli Lilly and Co (LLY.US)$Eli Lilly's stock price has soared due to the diabetes drug Ozempic, which affordable people are taking in large quantities to lose weight.
Like the Fidelity OTC Fund, Vanguard Primecap has been a long-term fund that has performed well, but its ROI hasn't kept up with the QQQ ETF. Morningstar data shows that Primecap suffered $3.5 billion in outflows over the past year.
If you're an Nvidia fan, the QQQ ETF may be a good enough investment, as might other cheap growth stock ETFs, such as the Invesco Russell Top 200 Growth ETF, with Nvidia holding just under 12%, or the more diversified Vanguard Growth Index Fund, with Nvidia holding 10.6%. You could also just buy Nvidia stock.
As Wall Street often says: never fall in love with a stock. In the history of funds, there have been fund managers who have bet heavily on one stock only to lose everything. The most famous may be Robert Goldfarb of the Sequoia Fund, who had a huge position in Valeant Pharmaceuticals but later blew up.
Perhaps investors shouldn't let Nvidia be the only thing they care about, as other fund categories have also performed well: Indian stock funds rose 9.3% this quarter; precious metals funds rose 6.2%; even utility funds rose 3.5%, it's hard to imagine there are any better investment tools for diversifying Nvidia investment risks than utility funds.
Edited by Jeffrey