Nvidia (NVDA) could one day dominate the U.S. stock market benchmark S & P 500 by a magnitude that has never been seen before, more than doubling the influence of past leaders like Apple and Nokia, along with current leader Microsoft. “History suggests NVDA could become 10-15% of S & P 500,” wrote chip analyst Mark Lipacis in a note Friday. “We have observed that at each successive computing era, the ecosystem players represent a larger weighting of the S & P 500.” Following a 200% surge over the past 12 months that’s pushed the AI-darling’s market value above $3 trillion, Nvidia’s current weighting in the S & P 500 has grown to 6.6%, according to FactSet data. Microsoft is tops with a 7% weighting, while Apple is third at 6.4%, according to FactSet. NVDA 1Y mountain Nvidia, 12 months The analyst, who joined Evercore in April from Jefferies , noted that each company that has come to dominate a particular technology gets rewarded with a larger and larger weighting of the entire market by investors. Lipacis pointed out that Digital Equipment Corporation (later bought by Compaq) was 1% of the S & P during the mini-computer period, Nokia garnered 2% of the benchmark as cell phones emerged and Apple got 4% of the S & P 500 in 2015 thanks to smart phones. Microsoft is tops today at 7% because of its dominance of the data center/PC market, the analyst said. “Based on this trajectory, and NVDA’s dominant position as the parallel processing chip+software+hardware+networking play, we think it is not out of the question that NVDA can ultimately become a 15% weight in the S & P 500,” wrote Lipacis. The analyst is telling clients to keep buying Nvidia to get ahead of this move and believes the shares are still trading at a reasonable multiple. Nvidia is already doing most of the heavy lifting for the S & P 500. The chipmaker is responsible for about 37% of the S & P 500’s year-to-date 12% return.
