Apple and Tesla Lose Ground to Nvidia as the Largest Holding in Retail Portfolios

Move over Apple and Tesla, retail investors might have a new favorite stock: Nvidia.

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Nvidia (NVDA) has experienced a remarkable surge in share price since the start of the year, driven largely by the excitement around artificial intelligence (AI). Nvidia produces the hardware and software essential for building and training AI models, positioning it perfectly to capitalize on the AI boom. The company’s recent earnings call highlighted its success in this area.

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During Wednesday's earnings call, Nvidia reported that it had significantly exceeded expectations. The company’s Q1 sales skyrocketed by 262% year-over-year to $26 billion, and its earnings per share soared by 461% to $6.12.

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Following this announcement, Nvidia's stock opened at $1,020.28 on Thursday, up over 7% from the previous close.

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Even before Nvidia’s earnings announcement, data indicated that Nvidia had become the largest holding in the average retail investor’s portfolio.

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Investment research firm Vanda Research analyzed the 15 most widely held stocks and ETFs in the average retail portfolio, ranking them by weight. Nvidia topped the list, accounting for 9.3% of the average retail portfolio, surpassing other popular stocks such as Apple (AAPL), SPY, Tesla (TSLA), QQQ, and Meta (META).

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A year ago, Nvidia comprised only 4.2% of the average retail trading portfolio, compared to Apple and SPY at 12.3%, and Tesla at 6.2%. At the start of 2024, Nvidia’s weight had increased to 5.5%, but it was still behind these three securities.

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Nvidia’s rapid share price growth (205.2% in one year) allowed it to overtake the others within just a few months.

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Vanda Research also revealed that retail investors poured $13.787 billion into Nvidia over the past year. Although significant, this amount was less than the money retail investors invested in ETFs like SPY and QQQ, as well as Tesla, which performed the worst among these assets.

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Moreover, Vanda’s data, based on prices from May 21, did not account for Nvidia’s substantial gains after its recent earnings report. Given Nvidia’s significant presence in the average retail portfolio, individual investors are poised to benefit from the company’s impressive earnings. Vanda's research also indicates that individual investors are currently outperforming the S&P 500 index, largely due to their preference for technology stocks.

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Will retail investors continue their strong interest in Nvidia? Several factors could influence this.

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Despite the $13.787 billion in net buys over the past year, data from JP Morgan showed that retail investors were net sellers leading up to the recent earnings report. JP Morgan also noted a steady decline in retail participation in Nvidia since 2023.

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Nevertheless, Vanda asserts that retail investors remain optimistic about Nvidia. Additionally, Nvidia announced a 10-for-1 stock split during its earnings call. Traditionally, stock splits are believed to attract retail investors by lowering the share price, making it more accessible. Data from Cboe supports this belief, particularly for mega-cap stocks. With Nvidia’s market cap currently exceeding $2.5 trillion, it is undoubtedly a mega-cap stock.

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This enthusiasm for Nvidia among retail investors is noteworthy, considering the broader trends and the company's strong financial performance. As AI continues to grow in importance, Nvidia's role in this sector positions it as a compelling investment choice. However, market dynamics and investor behavior will ultimately determine whether Nvidia retains its favored status among retail investors.

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