NVIDIA's (NVDA) Low Allocation Hinders Active Funds from Outperforming

Core Insights - Active funds in the United States have struggled to outperform the broader market, primarily due to underweighting in NVIDIA, which is the most-held semiconductor stock by these funds [1][2] - Despite NVIDIA's strong sales growth potential, its relative weight in active funds is significantly lower than that of its peers, contributing to the underperformance of these funds [2] - The underperformance of active funds in 2024 is attributed mainly to NVIDIA's stock fluctuations, which have impacted fund managers' strategies [3] Group 1: Active Funds Performance - Active funds have averaged a net growth of 20% in 2024, trailing the S&P 500 index's return of 22.1% by 2.1%, marking the largest underperformance since 2019 [3] - The strong performance of large-cap stocks, which active funds typically underweight, has distorted annual results [3] Group 2: NVIDIA's Market Position - NVIDIA's shares recently surged to an intraday high of $124.26, closing at $122.8, reflecting a 3.32% gain [1] - NVIDIA's relative weight in active funds is 0.99 times, significantly lower than that of top competitors in the technology and communication services sectors [2] - Companies with higher weightings than NVIDIA include Meta, Salesforce, Microsoft, and Alphabet, as well as firms like Applied Materials, KLA, and Micron Technology in the semiconductor industry [2]