The S&P 500 (SNPINDEX: ^GSPC) index is up by 30% over the past year, and one-fifth of that gain is attributable to a single stock: Nvidia (NASDAQ: NVDA). The chip giant has delivered a return of 186% over the last 12 months, and with a valuation of $3.6 trillion, it represents 7% of the total value of the S&P 500.
But Nvidia isn’t alone. It’s part of a collection of technology giants dubbed the “Magnificent Seven” which have generated an average return of 56% over the past year. The companies have a combined market capitalization of $16.9 trillion, and represent 32.1% of the entire S&P 500.
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Simply put, investors who don’t have exposure to the above tech stocks have likely underperformed the broader market. But the good news is that they can get that exposure very easily through an appropriate exchange-traded fund (ETF).
The Vanguard Mega Cap Growth ETF (NYSEMKT: MGK) has nearly half of its portfolio invested in four of America’s largest tech stocks. It consistently outperforms the S&P 500 over the short and long term. Here’s why it’s a great buy for investors of all experience levels.
The Vanguard Mega Cap Growth ETF holds just 71 different stocks. The fund is highly concentrated, with the technology sector representing 61.4% of the value of its portfolio, followed by the consumer discretionary sector at 20.3%.
In fact, its top four holdings alone represent 45.1% of its portfolio, but they are among the top artificial intelligence (AI) powerhouses that practically every investor wants to own.
|
Stock |
Vanguard Mega Cap Growth ETF Weighting |
|---|---|
|
1. Apple (NASDAQ: AAPL) |
13.36% |
|
2. Nvidia |
12.52% |
|
3. Microsoft (NASDAQ: MSFT) |
12.35% |
|
4. Amazon (NASDAQ: AMZN) |
6.82% |
Data source: Vanguard. Portfolio weightings are accurate as of Oct. 31, 2024, and are subject to change.
Apple just rolled out its Apple Intelligence software, which it developed with OpenAI. It delivers a slate of new AI features for owners of the latest iPhones, iPads, and Mac computers, including powerful writing tools that can summarize and generate text content for emails or messages. Apple has over 2.2 billion active devices worldwide, so it could become the biggest distributor of AI to consumers.
Nvidia supplies the most popular data center graphics processing units (GPUs) for developing AI models. The company’s data center revenue generated triple-digit percentage growth in each of the last six quarters because demand continues to outstrip supply. That momentum should continue now that Nvidia is shipping its powerful new Blackwell GPUs, with CEO Jensen Huang recently describing demand as “staggering.”
