In the wake of Nvidia’s stellar stock performance, fund portfolios with allocations to the U.S. producer of next-generation artificial intelligence chips were at their concentration limits before the stock started giving up some of its spectacular recent gains in recent trading sessions. The limits compelled fund managers to reduce their holdings in what Goldman Sachs last year dubbed ”the most important stock on earth”.
Investment manager Baillie Gifford for example is among the fund managers that have recently trimmed their clients’ holdings in the stock to make sure it stays below the assigned limit of 10 percent. Other funds have made similar decisions.
“If a stock exceeds that due to growth in the share price then we will trim our holding,” Baillie Gifford partner Tim Garratt told Investment Officer. “We had to do this in 2020 when Tesla’s share price surged, and in recent months we trimmed Nvidia a few times to keep it within the 10 percent limit, at around 8-9 percent.”
Amundi fund allocated 34.49% to Nvidia
A comprehensive review of European and US funds, based on Morningstar data generated at the request of Investment Officer, has turned up a single Luxembourg-domiciled investment fund as the one fund with the largest exposure to AI chip manufacturer Nvidia worldwide. The Amundi MSCI Semiconductors ESG Screened Ucits ETF tops the list with an allocation of 34.49 percent of its holdings to Nvidia per 17 June.
The Amundi MSCI Semiconductors fund, which holds approximately 430 million dollars in assets, is a passive ETF that seeks to replicate the performance of the MSCI ACWI Semiconductors & Semiconductor Equipment ESG Filtered Net Total Return Index. This index covers mid and large-cap stocks in developed and emerging markets that are classified in semiconductors and semiconductor equipment, including TSMC, Broadcom and ASML.
Amundi said the fund’s investment objective is to replicate the underlying index both upwards and downwards. “The methodology of the index provider details that the Index constrains the weight of the largest group entity at 35 percent, and all other group entities at 20 percent,” Amundi clarified in response to a press inquiry.
Amundi Ucits ETFs appear four times on the European list of funds with the biggest allocations to Nvidia in terms of percentages allocated. Its other three ETFs hade Nvidia allocations of respectively 21, 4.5 and 1.5 percent per 17 June. With some 2,000 billion euro in assets under management, Paris-based Amundi is Europe’s biggest asset manager.
Baillie Gifford trimmed Nvidia ‘a few times’
At Baillie Gifford in Edinburgh, Garratt said that the firm’s funds and clients use “concentration guidelines” to restrict the weight of a single stock in their portfolios. For the Baillie Gifford Long Term Global Growth fund, known as LTGG and with nearly four billion in assets under management, that is 10 percent, and it’s similar for other portfolios.
Nvidia has added some 2,800 billion dollars of market capitalisation over the last 18 months and last week briefly replaced Microsoft as the world’s most valuable company. With tech watchers now wondering how much fuel is left in Nvidia’s rally, Baillie Gifford’s fundamental conviction about the chipmaker remains firm, Garret said.
“However, we know that this is a cyclical industry and with technical factors at play. For LTGG, the exit multiple needed for significant upside is starting to look stretched,” Garret explained. “Whilst Nvidia remains a high conviction position in the portfolio, we’ve recycled some client money out of the stock in recent months into some newer holdings.”
Invesco ETF has second-biggest exposure, iShares third
IThe Ireland-domiciled Invesco S&P World Information Technology ESG Ucits ETF Acc fund ranks as the European fund with the second-largest Nvidia exposure at 25 percent as of June 20. This fund benchmarks against the S&P World ESG Enhanced Information Technology Index.
BlackRock’s iShares MSCI World Information Technology Sector ESG Ucits ETF, also domiciled in Ireland with 720 million euro in assets, ranks third with a 22 percent exposure to Nvidia. It uses the MSCI World Information Technology Index as its benchmark.
In the U.S., semiconductor ETFs offered by Strive and Van Eck top the list with Nvidia exposures of 27.2 percent and 25.0 percent, respectively. Morningstar’s overview of 60 non-US funds with at least 1 percent allocations to Nvidia included only two Luxembourg-domiciled funds, with the majority being Irish ETFs, along with funds domiciled in Taiwan, Hong Kong, and the UK.
Nvidia exposures in passive technology funds (Europe)
Nvidia exposures in passive technology funds (US)
