Nvidia beats Apple and Tesla to become the largest holding in average retail portfolio

By Gordon Gottsegen

Nvidia quickly overtook other popular stocks as the largest holding, partially due to its rapid rise in price

Step aside Apple and Tesla, retail investors may have a new favorite stock: Nvidia.

Nvidia (NVDA) has seen a tremendous growth in share price since the start of the year, thanks in part to the hype surrounding AI. Nvidia creates hardware and software that helps build and train AI models, so the company is well positioned to take advantage of AI fervor. And the company's latest earnings call proved it was doing just that.

During its Wednesday earnings call, Nvidia revealed that it crushed expectations, with Q1 sales up 262% year-over-year to $26 billion, and earnings per share up 461% to $6.12.

In reaction to this news, the stock hit $1020.28 at Thursday's open, up more than 7% from previous close.

But even before Nvidia revealed its earnings beat, data shows that Nvidia became the largest holding in the average retail investor's portfolio.

Investment research firm Vanda Research collected data on the 15 most widely held stocks and ETFs in the average retail portfolio, and sorted them by weight. Nvidia came out on top at 9.3% of the average retail portfolio, beating out other popular tickers such as (AAPL), SPY, (TSLA), QQQ and (META).

The chart above provides several interesting pieces of information. The data shows that Nvidia only made up 4.2% of the average retail trading portfolio a year ago, compared to Apple at 12.3%, SPY at 12.3% and Tesla at 6.2%. At the start of 2024, Nvidia's weight grew to 5.5%, but it was still behind those three securities.

Nvidia's rapid growth in share price (205.2% in one year) helped it overtake the others in just a few months.

Vanda also reveals that $13.787 billion of retail net buys went into Nvidia over the past year. That's not an insignificant number, but it's less than the amount of money that retail poured into ETFs like SPY and QQQ, as well as Tesla, which was the worst performing asset of the bunch.

On top of this, Vanda's data was based on prices on May 21, so they don't account for Nvidia's significant gains after reporting its latest earnings. Thanks to NVDA's weight in the average retail portfolio, individual investors stand to benefit from the company's earnings beat. Vanda research also shares that individual investors are currently outpacing the S&P 500 index, thanks to retail's affinity towards technology stocks.

Will retail investors continue their love affair with Nvidia? There are a few factors at play that could affect this.

Despite the $13.787 billion of net buys over the past year, data from JP Morgan saw that retail was a net seller leading into the recent earnings. JPM has also observed a steady decline in retail participation in Nvidia since 2023.

But Vanda says that retail investors remain bullish on Nvidia. On top of that, Nvidia also announced a 10-for-1 split during its earnings call. Traditional thinking believes that stock splits attract retail investors due to the lower share prices providing a lower bar for entry, and data from Cboe found that this was true for mega cap stocks. With Nvidia's market cap currently sitting above $2.5 trillion, it's certainly a mega cap stock.

-Gordon Gottsegen

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-23-24 1111ET

Copyright (c) 2024 Dow Jones & Company, Inc.