Nvidia overtakes Apple as top S&P 500 fund holding at 7.5%

Nvidia overtook Apple as the largest Vanguard S&P 500 ETF holding, at 7.50 percent of assets versus 6.58 percent for Apple as of June 30.

"The ordering of those two names says a lot about what an S&P 500 fund has become," Daniel Sparks, a contributing analyst at The Motley Fool, said.

Microsoft follows at 4.29 percent, Amazon at 3.61 percent and Alphabet at 3.24 percent for its Class A shares alone, putting the top five positions at 25.22 percent of the fund's $1.05 trillion in assets. Nvidia first edged past Apple's market value on June 5, 2024, at about $3.02 trillion versus $2.99 trillion, and within two weeks had passed Microsoft to take the top spot outright.

Nvidia is now worth about $5.3 trillion to Apple's $4.5 trillion, a gap of roughly $800 billion, and reports earnings after the close on Aug. 26 — a print that could move the fund's next trading day given the single-stock weight.

The concentration runs deeper than the headline numbers suggest. Count both of Alphabet's share classes and the top five companies hold nearly 28 percent of every dollar invested. Broadcom, another chip designer, sits sixth at 2.77 percent, while memory maker Micron climbed into the fund's top 10 at 2.01 percent by the end of June, on the same AI demand lifting the names above it.

No fund manager decided any of this. An S&P 500 index fund weights companies by float-adjusted market value, not by results. Nvidia grew revenue 85 percent year over year in its most recent fiscal quarter, to $81.6 billion, the market repriced it, and the index simply let the position swell. Apple didn't shrink. Nvidia outgrew it.

A quarter of the fund rides on five stocks

The fund's 10 biggest positions account for 36.33 percent of assets. Of a $10,000 investment, about $3,633 goes into those 10 positions and $6,367 gets spread across the other 510 — an average of about 0.12 percent each, or roughly $12 per position.

That's the arithmetic behind a point many index investors haven't fully absorbed. Owning "the whole market" today means making a sizable bet on a handful of AI-linked giants, with hundreds of small positions attached. The S&P 500 traded at 7,674 on Friday, up 0.4 percent, while the Vanguard fund itself changed hands near $703.71.

A self-correcting design

This isn't a flaw in the fund. Concentration is what a market-value-weighted index does when a few businesses grow much faster than the rest, and it has served index investors well before. Apple's long run at the top came with enormous gains for anyone who simply held on.

The design also self-corrects. A market-value-weighted fund can concentrate on the way up and thin back out on the way down without a single trade. If AI leadership fades, the index demotes today's giants one trading day at a time, no decision required, all for a 0.03 percent expense ratio.

The flip side is arithmetic, too. A 20 percent Nvidia decline, all else equal, would clip about 1.5 percent off the whole fund by itself. Still, the diversification an index fund's label promises is thinner at the top than it used to be. A quarter of the money rides on five companies — and more of it rides on Nvidia than on any other stock.

An S&P 500 fund remains the simplest way to own the U.S. market. It's just worth knowing what the weights say now. In meaningful part, this is a bet on the AI build-out.

This article is for informational purposes only and does not constitute investment advice.