Nvidia Dominates Tech ETFs Despite Market Correction

Nvidia (NASDAQ: NVDA) has emerged as a dominant force in several tech-focused exchange-traded funds (ETFs), solidifying its position despite a recent market correction that brought its market cap to $3 trillion. While no longer the world’s largest company, Nvidia’s size does not appear to hinder its growth potential, particularly in the field of artificial intelligence (AI). In fact, the company’s substantial size may fuel further expansion in the data-driven AI era.

The Technology Select Sector SPDR Fund (XLK) is an ETF worth watching, especially after a significant rebalancing of its top holdings. XLK is even more top-heavy than the Nasdaq 100, with Microsoft and Nvidia accounting for over 20% each of the ETF’s holdings. This high concentration in just two stocks takes portfolio concentration to another level, potentially amplifying the volatility of NVDA stock. However, for investors seeking increased exposure to Nvidia and Microsoft, XLK offers an appealing option.

The VanEck Robotics ETF (IBOT) is another ETF with a notable Nvidia presence, albeit with a smaller weightage. IBOT provides investors with exposure to semiconductor equipment manufacturers that stand to benefit from automation robotics in manufacturing. Additionally, IBOT includes lesser-known international firms striving to unlock the potential of AI and automation in the physical world. With greater diversification compared to XLK, IBOT offers a balanced approach for investors seeking exposure to robotics beyond Nvidia.

The VanEck Semiconductor ETF (SMH) serves as a popular gauge for the broader semiconductor market’s health. While SMH provides broad exposure to 26 holdings, Nvidia remains a significant component, comprising over 20% of the ETF. Taiwan Semiconductor follows with a weightage of 12.9%. Both SMH and XLK present attractive options for passive investors looking to capitalize on Nvidia’s growth potential and its peers in the tech industry.