3 ETFs to Buy for Nvidia Stock Dominance

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  • Tech ETFs are a great fit for new investors who want to hop aboard the Nvidia stock train as it chugs higher.
  • Technology Select Sector SPDR Fund (XLK): The recent rebalance takes the Nvidia exposure to the next level.
  • VanEck Robotics ETF (IBOT): It’s lighter on the Nvidia, but heavy on U.S. and international automation plays.
  • VanEck Semiconductor ETF (SMH): A go-to ETF is for many seeking exposure to the broad semi scene. 
ETFs for Nvidia exposure - 3 ETFs to Buy for Nvidia Stock Dominance

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Nvidia (NASDAQ:NVDA) has grown to become quite a dominant holding in a number of tech-focused exchange-traded funds (ETFs) amid its glorious ascent. Though NVDA stock is no longer the world’s largest company after its latest correction, bringing the market cap to $3 trillion flat, I still think it’s a bad idea to think the firm can’t continue its growth just because of its behemoth size.

Indeed, a firm’s sheer size alone doesn’t seem to act as a limitation on growth, especially for firms, like Nvidia, which seems to have pulled so far ahead of the pack on AI. Further, in the artificial intelligence (AI) age, where data is a precious commodity, perhaps the size of a firm is fuel for further growth. The S&P 500 is already top-heavy. But it could become a lot top-heavier as the AI boom continues.

NVDA stock is expected to keep experiencing intense volatility. For those who want to dampen the choppiness, perhaps an Nvidia-exposed ETF is worth consideration. Let’s examine three that are heavy on NVDA shares.

Technology Select Sector SPDR Fund (XLK)

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Technology Select Sector SPDR Fund (NYSEARCA:XLK) is perhaps the most interesting tech ETF to watch following the big rebalancing of its top holdings.

Indeed, ETF rebalancing acts tend to be less of a big deal. However, the XLK is even top-heavier than the Nasdaq 100. And it’s extremely concentrated in its top two holdings, with other individual holdings (including the third largest) typically contributing 5% or less.

Today, Microsoft (NASDAQ:MSFT) and Nvidia each contribute over 20% of the XLK ETF’s holdings. Indeed, having more than 40% in just two stocks takes portfolio concentration to another level.

Though cranking up the Nvidia exposure at the expense of Apple (NASDAQ:AAPL)—which now has a 4.5% weighting in the XLK, down from over 20%—may prove ill-timed. If NVDA stock’s correction continues while AAPL stock gains on Apple Intelligence, I do think XLK is giving investors what they want. The crowds want more Nvidia, and they’re getting to go with a huge serving of Microsoft shares with the XLK.

VanEck Robotics ETF (IBOT)

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The VanEck Robotics ETF (NASDAQ:IBOT) is another Nvidia-heavy ETF. Further, NVDA stock boasts a sizable but not colossal weight, typically lying in the single-digit percentages. Indeed, if you like Nvidia but don’t want it to be too much of a needle mover on an ETF, IBOT may be more your thing.

Additionally, investors gain exposure to interesting semiconductor equipment makers that could greatly benefit from automation robotics in manufacturing. More intriguingly, many of the names are lesser-known international firms striving to unlock the benefits of AI and automation in the physical world.

All considered, the IBOT ETF looks like a diversified way to play robotics companies that extend well beyond Nvidia. The greater diversification relative to the XLK is a major plus for new investors who want to steer away from overconcentration risk rather than towards it for a shot at bigger gains.

VanEck Semiconductor ETF (SMH)

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VanEck Semiconductor ETF (NASDAQ:SMH) is a popular ETF to get a quick gauge of the health of the broader semiconductor market. As you’d expect, SMH shares have been smoking hot of late, up more than 53% year-to-date (YTD).

Like NVDA stock, the SMH has been a bit wobbly this month, pulling back around 6.5% from all-time highs. The dip is likely nothing to worry about given the hot semi plays probably still have years of growth ahead of them.

Despite broad exposure to 26 holdings, the SMH, like the XLK, is heavy on Nvidia, with the stock comprising more than 20% of the ETF. However, unlike the XLK, Nvidia is the only firm to boast a weight of more than 20%. In the second spot, it’s Taiwan Semiconductor (NYSE:TSM), with a 12.9% weight.

Indeed, SMH and XLK both look incredibly enticing if you want a passive way to play Nvidia and its peers. Depending on which angle you want to play tech, both ETFs stand out as intriguing.

On the date of publication, Joey Frenette held shares of Apple and Microsoft. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joey Frenette is a seasoned investment writer specializing in technology and consumer stocks. Contributing to the Motley Fool Canada, TipRanks, and Barchart, Joey excels in spotting mispriced stocks with long-term growth potential in a fast-paced market.


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