Explore the Extraordinary Vanguard ETF, Boasting an Investment of 45.1% in Nvidia, Apple, Microsoft, and Amazon
The S&P 500 (^GSPC -0.61%) index has increased by 30% over the past year, with a large chunk of that growth coming from a single stock: Nvidia (NVDA -2.55%). This tech giant has provided a return of 186% over the last 12 months and currently holds a valuation of $3.6 trillion, making up 7% of the S&P 500's total value.
However, Nvidia isn't the only tech company performing well. It's part of a group of tech titans known as the "Magnificent Seven," which have collectively delivered an average return of 56% over the past year. These companies have a combined market capitalization of $16.9 trillion, accounting for 32.1% of the entire S&P 500.
Investors who have not invested in these tech stocks have likely underperformed the market. But the good news is that they can easily gain exposure to these stocks through an appropriate exchange-traded fund (ETF).
The Vanguard Mega Cap Growth ETF (MGK -0.61%) has nearly half of its portfolio invested in four of America's largest tech stocks. This ETF consistently outperforms the S&P 500 in both short and long-term periods.
Large holdings in popular AI stocks
The Vanguard Mega Cap Growth ETF features just 71 different stocks. The fund has a highly-concentrated portfolio, with the technology sector making up 61.4% of its value, followed by the consumer discretionary sector at 20.3%.
1. Apple (AAPL 1.61%)
In fact, the top four stocks alone account for 45.1% of its portfolio. These top stocks belong to some of the most powerful AI companies that every investor wants to own.
13.36%
| Stock | Vanguard Mega Cap Growth ETF Weighting || --- | --- || 1. Apple (AAPL 1.61%) | 13.36% || 2. Nvidia | 12.52% || 3. Microsoft (MSFT 0.55%) | 12.35% || 4. Amazon (AMZN -0.41%) | 6.82% |
Apple has recently released its Apple Intelligence software, developed with OpenAI. This software offers a range of new AI features for owners of the latest iPhones, iPads, and Mac computers, including powerful writing tools that can summarize and generate text content for emails or messages. With over 2.2 billion active devices worldwide, Apple could quickly become the largest distributor of AI to consumers.
2. Nvidia
Nvidia is the go-to supplier for the most popular data center graphics processing units (GPUs) used for developing AI models. The company's data center revenue has seen triple-digit percentage growth in each of the last six quarters due to continuous high demand. Nvidia's powerful new Blackwell GPUs are now in production, and demand for these is described as "staggering" by CEO Jensen Huang.
12.52%
Microsoft and Amazon are two of Nvidia's top customers. They both fill their data centers with GPUs to rent their computing power to businesses and developers for affordable AI model deployment. Moreover, both companies have developed their own AI chatbots and virtual assistants, which could become significant sources of revenue in the near future.
The "Magnificent Seven" stocks are all top-10 positions in the Vanguard Mega Cap Growth ETF. However, the fund also holds stocks like pharmaceutical giant Eli Lilly, payments powerhouse Visa, retail titan Costco Wholesale, and fast food giant McDonald's.
3. Microsoft (MSFT 0.55%)
The Vanguard Mega Cap Growth ETF is incredibly affordable to own, with an expense ratio of just 0.07%. This is much lower than the average expense ratio of 0.94% for comparable funds (according to Vanguard). High expenses can significantly eat away at investors' returns over the long term.
12.35%
The Vanguard Mega Cap Growth ETF consistently outperforms the S&P 500
Since its inception in 2007, the Vanguard Mega Cap Growth ETF has delivered a compound annual return of 13%, which is better than the S&P 500's annual average return of 10.2% over the same period. The ETF has generated an accelerated compound annual return of 15.9% over the last 10 years, compared to the S&P 500's 13.2% annual return over the same period.
4. Amazon (AMZN -0.41%)
While AI isn't the primary driver for the Vanguard Mega Cap Growth ETF, it's expected to have a significant impact on its returns in the future. Given the ETF's large positions in companies like Nvidia, Apple, Microsoft, and Amazon, AI's potential could lead to impressive returns for the ETF.
6.82%
According to Goldman Sachs, AI could add $7 trillion to the global economy over the next 10 years. Other forecasts place this figure at $15.7 trillion by 2030. However, if AI fails to meet expectations, some of the "Magnificent Seven" stocks may experience significant decreases in value. Consequently, investors should consider including the Vanguard Mega Cap Growth ETF as part of a diverse portfolio that doesn't already have a high level of exposure to these tech giants.
Investors who have not yet allocated funds towards tech stocks, like those in the "Magnificant Seven," might be missing out on potential profitable opportunities. By investing in an exchange-traded fund (ETF) such as the Vanguard Mega Cap Growth ETF, individuals can easily gain exposure to these high-performing companies.
The Vanguard Mega Cap Growth ETF has a substantial portion of its portfolio invested in technology stocks, with some of the top AI companies making up a significant portion of its holdings. For instance, tech giants Apple, Microsoft, and Nvidia collectively account for more than 45% of the ETF's portfolio.
