Large-cap growth outperforms broader market, despite significant drawdowns.

Large-cap growth continues to outperform the broader market with significant drawdowns, yet investors remain bullish. NVIDIA (NVDA) is a notable poster-child stock in this group, with some active mutual funds showing comparable risk and return profiles to index ETFs.

Large-cap growth stocks have continued to outperform the broader market, despite significant drawdowns. Among the notable performers, NVIDIA (NVDA) stands out as a poster-child stock, with some active mutual funds exhibiting comparable risk and return profiles to index ETFs. On Wednesday, NVIDIA became the first company to surpass $4 trillion in market cap, an impressive feat that has significant implications for the stock market and investors.

NVIDIA's rise to $4 trillion in market cap is a testament to investor optimism for artificial intelligence and the tech sector. The company was once a fraction of the size of tech giants like Apple and Microsoft but has since grown to become one of the most valuable companies in the world. This remarkable achievement has not only impacted NVIDIA's shareholders but also the broader market, as the company is a component of the S&P 500, Dow Jones Industrial Average, and Nasdaq-100 index.

The largest funds, including index funds and ETFs, are heavily based on stock market indexes. For instance, the Vanguard S&P 500 ETF (VOO) mirrors the performance of the S&P 500 index and is one of the largest ETFs in the world, with $1.43 trillion in net assets. Similarly, the Invesco QQQ Trust (QQQ), which tracks the Nasdaq-100 index, has $334 billion in net assets. These funds are popular choices for investors seeking exposure to major indexes.

NVIDIA's dominance in these indexes has led to significant concentration. For example, in the Nasdaq-100 index, NVIDIA accounts for 13.6% of the total weight, making it the largest holding. This concentration can pose risks, as it means that the performance of a single stock can have a disproportionate impact on the index's overall performance. Investors should be aware of this risk when investing in index-based funds or ETFs.

Moreover, the easing of China's export restrictions on high-end AI chips has been viewed as a positive development for NVIDIA and other U.S. semiconductor giants like AMD. The policy shift is seen as a sign of diplomatic de-escalation and a welcome development for the AI sector, which has been affected by heightened U.S.-China tech tensions. The streamlined process for licensing AI chip exports to Chinese companies could help preserve billions in annual revenue from China-based customers for U.S. chipmakers.

The easing of China's export restrictions may also contribute to a long-term rally in NVIDIA stock. Analysts suggest that the restored access to the massive Chinese market could ignite a long-term rally, potentially pushing shares to $300 or higher by 2027. Additionally, the continued growth in global AI adoption, with Chinese tech firms racing to build local versions of OpenAI and Google DeepMind, is expected to drive demand for NVIDIA's accelerated compute hardware.

In conclusion, NVIDIA's market cap milestone has significant implications for the stock market and investors. The company's dominance in major indexes and the easing of China's export restrictions present both opportunities and risks. Investors should carefully consider their exposure to NVIDIA and other large-cap growth stocks when constructing their portfolios.

References:
[1] https://www.theglobeandmail.com/investing/markets/stocks/AAPL/pressreleases/33379754/how-does-nvidias-reaching-4-trillion-in-market-cap-impact-the-sp-500-nasdaq-100-and-dow-jones/
[2] https://www.fingerlakes1.com/2025/07/17/nvidia-stock-outlook-china-chip-exports-43687648/