Thanks to its dominant position in the field of ai chips, Nvidia's stock has performed extremely well in recent years. Since early 2023, the stock price has risen by about 785%, and by about 160% this year alone. In June of this year, Nvidia briefly became the world's most valuable company. Product structure, with 10-30 billion yuan products, operating income of 401/1288/60 million yuan respectively.
However, last week, due to the cooling of inflation data, there was a significant daily fluctuation in large-cap tech stocks, and Nvidia fell nearly 6% on Thursday, the largest single-day decline in more than two weeks, while the technology-heavy Nasdaq 100 index fell about 2.2%.
Analysts believe that increased competition, changes in supply and demand balance, and overvaluation may increase the risk of Nvidia's stock. "If Nvidia's stock price falls, being overly concentrated in one stock could pose a risk to investors."
"Funds holding Nvidia have benefited greatly from it."
Currently, Nvidia's share in funds is constantly increasing. According to Morningstar's data, as of the end of the first quarter of this year, 355 actively managed funds held Nvidia's stock, accounting for 5% or more of their total assets, compared to only 108 funds in the same period last year.
Jack Shannon, a senior analyst at Morningstar, pointed out: "Some portfolio managers believe they missed their chance with Apple or Microsoft, and don't want to miss out on artificial intelligence, so they're reluctant to sell Nvidia."
Some analysts believe that Nvidia's huge position reflects investors' desire to invest in a few large growth stocks, which has led to a highly concentrated market. According to data from the Dow Jones Industrial Average, Nvidia alone accounts for about one-third of the Standard & Poor's 500 index gains this year.
Bank of America's global research strategist said that the current market concentration is the third highest since 1986, with only 24% of stocks in the Standard & Poor's 500 index outperforming the index in the first half of this year.
"Funds holding Nvidia have benefited greatly from it." Morningstar data shows that actively managed US stock funds holding Nvidia stocks averaged a 16.3% gain in the first six months of 2024, while funds not holding the stock averaged a 5.7% return.
Market fluctuations have caused investor concerns.
Currently, the average target price for Nvidia is $133.45, which is about 3% higher than the current level. According to data from the London Stock Exchange, Nvidia's forward P/E ratio is 39.3 times, which is about 50% higher than the industry median. Some analysts believe that Nvidia's valuation is already too high and may experience a pullback.
Federated Hermes' Chief Stock Market Strategist Phil Orlando said:
"Investing 6% or more of a portfolio in one stock obviously carries significant risk. Although a stock may rise like a rocket, this does not mean that it is wise to invest... Don't put all your eggs in one basket."
Anthony Zackery, portfolio manager at Zevenbergen Capital Investments, has held Nvidia since 2016, but he said he would "cautiously" reduce his position regularly to ensure that risk remains within his tolerance.
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