June 26, 2024: How Nvidia Became “The Most Important Stock in the World”

Since the beginning of May, Nvidia’s stock has appreciated 42%. Such a two-month move in a stock is not in itself unusual. However, this level of stock appreciation is unusual for a company that entered May as the U.S.’s third largest company by market capitalization. To put this in perspective, Nvidia’s two-month increase in market capitalization adds up to over $900 billion, equaling the market capitalization of Walmart and Home Depot combined.

More importantly for investors, the fortunes of Nvidia are having an unusually determinative effect on the U.S. stock market at large. With its current market cap of $3.2 trillion, Nvidia represents 6% of the combined market cap of the U.S’s largest 500 publicly traded companies (as measured by Bloomberg’s U.S. Large Cap Index). Its large index weight, and its status as the economy’s artificial-intelligence bellwether, led Goldman Sachs earlier this year to deem Nvidia “the most important stock in the world.”

While that might seem hyperbolic, Nvidia has undoubtedly proven itself as the most important stock for market-cap weighted, large-cap stock indices and those invested in passive strategies benchmarked to them. Year-to-date, those strategies have returned about 15%. Nvidia alone has contributed over 1/4 of those returns. Future returns of these strategies will hinge in large part on the performance of this single stock.

Weekly Market Update: June 26, 2024