XLK - XLK: Low Diversity Too Concentrated On Nvidia Stock
2024-06-28 12:06:14 ET
Summary
- Nvidia Corporation's increased weighting in The Technology Select Sector SPDR® Fund ETF poses concentration risk, impacting overall performance and vulnerability to market corrections.
- The XLK ETF's Seeking Alpha quant metrics raise concerns, especially with increased Nvidia weighting & potential downside risk of 45% in Nvidia, leading to a potential 9% downside in the ETF.
- Given this, I am a sell on the ETF.
- If the ETF rebalances away from Nvidia, I am willing to change my position due to other names in the fund that I am bullish on.
Investment Thesis
I believe the recent adjustments in The Technology Select Sector SPDR® Fund ETF ( XLK ) have increased Nvidia Corporation's (NVDA) weighting to a level that has led to heightened concentration risk, the antithesis of what many investors look for when investing in an ETF. As of the June rebalance, Nvidia's share in the XLK ETF surged to approximately 21% , which overshadowed other major components like Apple ( AAPL ) and Microsoft (MSFT). This follows a rise in Nvidia's stock price based on their performance selling GPUs to help fuel the artificial intelligence race????....
XLK: Low Diversity, Too Concentrated On Nvidia Stock