Macquarie Core Equity Fund's AI Dilemma: Underweight NVIDIA Hampers Returns Amid AI-Driven Rally

The Macquarie Core Equity Fund (WCEAX) has long been a stalwart of active management, leveraging its focus on high-quality, large-cap U.S. equities to outperform benchmarks. However, its recent performance in Q2 2025 reveals a critical tension between strategic caution and market momentum. Despite delivering a 11.94% return for the quarter—beating the S&P 500's 10.94%—the fund's relative underweight in NVIDIA Corp. (NVDA) emerged as a drag amid the AI-driven equity surgeNVIDIA Corp.’s (NVDA) Relative Underweight in Portfolio Impacted ...^[1]. This underweight, which positioned the fund below the S&P 500's 6.3% average allocation to NVIDIA, underscores a cautious stance toward one of the most dominant stocks in the AI eraNVIDIA Corp.'s (NVDA) Relative Underweight in Portfolio …^[2].

The AI Rally: A Missed Opportunity

The Q2 2025 market was defined by AI optimism, with AI semiconductor stocks surging 37% on averageQ2 2025 AI Public Comp Sheet and Valuation Guide^[3]. NVIDIA, the poster child of this rally, closed at $176.24 per share on September 18, 2025, with a market capitalization of $4.291 trillionNVIDIA Corp.’s (NVDA) Relative Underweight in Portfolio Impacted ...^[1]. Public markets increasingly rewarded companies with tangible AI revenue and platform control, and NVIDIA's dominance in AI infrastructure made it a linchpin of the rally. Yet, the Macquarie Core Equity Fund's underweight exposure to the stock limited its ability to capitalize on this tailwind.

According to a report by Yahoo Finance, the fund's decision to hold NVIDIA at a lower weight than the benchmark “negatively impacted its relative returns”NVIDIA Corp.'s (NVDA) Relative Underweight in Portfolio …^[2]. While the fund's 11.94% return outpaced the S&P 500, it lagged behind AI-driven benchmarks, which saw average returns of 68.5% for the periodQ2 2025 AI Public Comp Sheet and Valuation Guide^[3]. This gap highlights the growing divergence between traditional large-cap strategies and AI-centric capital flows.

Sector Selection vs. Stock-Level Caution

The fund's outperformance relative to the S&P 500 was largely attributable to its sector and security selection. Sector allocation accounted for 80% of the fund's relative returns, with a focus on high-quality, sustainable businessesMacquarie Core Equity Fund Q2 2025 Commentary^[4]. Apple Inc. (AAPL), for instance, contributed meaningfully to performance, with its 4.44% one-month return and $3.53 trillion market capNVIDIA Corp.’s (NVDA) Relative Underweight in Portfolio Impacted ...^[1]. However, the fund's cautious approach to AI stocks like NVIDIA suggests a risk-averse stance in a market increasingly defined by AI-driven growth.

This dichotomy raises questions about the fund's alignment with current market dynamics. While its long-term strategy emphasizes “sustainable competitive advantages,” the AI rally has rewarded companies with disruptive technological platforms—precisely the kind of innovation NVIDIA exemplifiesMacquarie Core Equity Fund Q2 2025 Commentary^[4]. By underweighting such a stock, the fund may have prioritized short-term risk mitigation over capturing the explosive growth potential of AI infrastructure.

A Broader Context: Active Management in an AI-Driven World

The Macquarie Core Equity Fund's performance must be viewed against the backdrop of a rapidly evolving market. AI-driven benchmarks, including the Nasdaq, rose 16.7% in Q2 2025, outpacing the S&P 500's 10.1% gainQ2 2025 AI Public Comp Sheet and Valuation Guide^[3]. This trend reflects a broader shift in capital allocation toward companies that can scale AI capabilities, a domain where NVIDIA holds unparalleled influence.

Despite this, the fund's 1-, 3-, and 5-year returns remain competitive, with Morningstar and Lipper rankings highlighting its strong peer-group performanceNVIDIA Corp.'s (NVDA) Relative Underweight in Portfolio …^[2]. This suggests that its active management approach, while not fully aligned with AI momentum, still delivers value through disciplined stock picking and sector rotation. However, as AI-driven markets continue to redefine growth paradigms, the fund's underweight in NVIDIA could become a more pronounced drag on returns.

Conclusion: Balancing Caution and Opportunity

The Macquarie Core Equity Fund's Q2 2025 performance illustrates the challenges of balancing traditional value strategies with the disruptive forces of AI. While its sector selection and security-level expertise enabled outperformance against the S&P 500, its underweight in NVIDIA—a stock that epitomizes AI's transformative potential—reveals a strategic misalignment with current market trends. For investors, this highlights the importance of evaluating fund managers' adaptability to technological shifts. In an era where AI is reshaping industries, even the most disciplined strategies must evolve to avoid being left behind.