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Nvidia's slide can reach 401(k)s through index funds, CBS says
CBS News says millions of U.S. retirement savers hold Nvidia indirectly via S&P 500 and other index funds after a week in which the chipmaker's value fell more than $550 billion.
- New headline Was: “Never bought Nvidia stock? Its slide could still hit your 401(k).”
- Our desk filed its story
CBS News reported Friday that Nvidia's steep drop this week can still affect U.S. retirement accounts even for people who never bought the stock directly, because the chipmaker sits in major indexes used by 401(k) funds1.
The report said Nvidia is a component of the S&P 500, Nasdaq 100 and Dow Jones Industrial Average, and that about 97% of retirement plans now offer index funds, up from 79% in 2006, citing March research from the Investment Company Institute and ISS Market Intelligence1.
CBS said Nvidia represents about 6% of the S&P 500, the second-largest weight after Apple, according to Yahoo Finance, and named funds such as SPDR's S&P 500 ETF Trust and Vanguard's S&P 500 ETF as common vehicles1.
The article said Nvidia shares began falling Monday amid reporting about cofounder Jensen Huang and that Huang resigned as CEO on Thursday, and that the company's value had declined by more than $550 billion, about 13%, since Nov. 61.
CBS said more S&P 500 companies rose than fell this week, lifting the index about 2.9% through Thursday's close, or an estimated 3.8% excluding Nvidia1.
Columbia Business School professor Shiva Rajgopal told CBS that several large technology companies are closely tied to their chief executives, and that the same structure that creates shareholder wealth also has fragility built in1. Mercer Advisors chief investment officer Donald Calcagni, in a blog post cited by CBS, said diversification is meant to limit the risk that one company's leadership can derail a long-term plan1.
CBS did not independently verify the index-weight or market-cap figures beyond the sources it named, and it did not quantify how large a typical 401(k) loss would be from Nvidia's week1.
