Nvidia Dominance Exposed: AI and Semiconductors ETFs Hold Surprising Concentration

Investors have been pouring money into AI and semiconductor exchange-traded funds (ETFs) in hopes of diversifying their portfolios. However, a closer look at these funds' holdings reveals that many are not as diversified as they claim to be.

According to current holdings data, the VanEck Semiconductor ETF (SMH) holds approximately 18.5% of Nvidia, making it a concentrated wager on this single stock. This is particularly concerning given that Nvidia's rally has been driven by its dominance in the AI-capex cycle.

The Global X Robotics and AI ETF (BOTZ), iShares Semiconductor ETF (SOXX), and Global X Autonomous and Electric Vehicles ETF (DRIV) also hold significant amounts of Nvidia, ranging from 8.4% to 2.7%. This means that investors who buy these funds are inadvertently taking on a high degree of single-stock risk.

While concentration can be beneficial when an investor is confident in the trend, it's essential to understand exactly how much of a particular stock they own. This is particularly relevant in today's market where a single company can define an entire sector's returns.