Nvidia Tops in Popularity Among S&P 500 Semiconductor Stocks, Analyst Sees Room for Growth

Zinger Key Points
  • Semiconductor weighting in S&P 500 dips from July '23 peak, highlighting shifting fund manager focus.
  • Nvidia leads in fund manager ownership among semis, yet its portfolio weighting lags behind growth potential.

Based on Bank of America Equity Strategy data, the analysis of semiconductor and Electronic Design Automation (EDA) stocks in the S&P 500 index reveals several trends as of the end of January 2024. 

The relative weighting of semiconductors, which indicates how much they are in portfolios relative to their weight in the S&P 500 index, has declined month-over-month from July 2023’s 1.18x to 1.09x, marking a 4% quarter-over-quarter reduction. This level remains below its peak of 1.36x in March 2017.

Nvidia Corp NVDA maintains the broadest ownership among fund managers, with 67% holding the stock, continuing its growth in ownership since June 2023. 

However, its relative weighting 1.01x is still below the average of the top 16 owned information technology and communication services peers despite Nvidia having significantly faster sales growth prospects.

The quarter saw notable ownership expansions in Broadcom Inc AVGOMicron Technology, Inc MUApplied Materials, Inc AMATIntel Corp INTC, Nvidia, and Cadence Design Systems Inc CDNS

Conversely, Microchip Technology Inc MCHPFirst Solar Inc FSLREnphase Energy Inc ENPHNXP Semiconductors NV NXPIAdvanced Micro Devices, Inc AMDQualcomm Inc QCOM, and KLA Corp KLAC experienced the most significant ownership declines.

The most significant increases in depth or overweighting were seen in Intel, ON Semiconductor Corp ON, and AMD, while First Solar, Qorvo Inc QRVOTeradyne Inc TERApplied Materials Inc AMAT, and Qualcomm observed the most substantial decreases in weighting.

Long-only investors were most overweight in Microchip Technology, ON Semiconductor, Enphase Energy Inc ENPHMonolithic Power Systems Inc MPWR, Broadcom, Texas Instruments Inc TXN, and NXP Semiconductors. 

In contrast, hedge funds favored AMD, Teradyne, Skyworks Solutions Inc SWKS, Micron, Cadence, and Qorvo the most.

Despite high ownership, the top six widely owned semiconductor stocks in the S&P 500, including Nvidia, Broadcom, AMD, Applied Materials, Lam Research Corp LRCX, and Texas Instruments, remain relatively underweighted when compared to their potential growth and market impact.

Price Action: NVDA shares closed higher by 3.18% at $887.00 on Wednesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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