Is NVIDIA Stock Increasing Your Market Risk?

You own or plan to own NVIDIA (NVDA), the chipmaker worth about $5.5 trillion, probably alongside funds that follow the market. If NVIDIA rises and falls with the market, it adds to a risk those funds already give you. So is NVIDIA stock increasing your market risk?

Yes, NVIDIA Stock Moves Further Than The Market

Yes. NVIDIA moved further than the S&P 500 on both down days and up days over the past year of daily closes. The index lost 0.61% on an average down day. NVIDIA lost 1.08% on those same days. On a $10,000 holding of NVIDIA, that is about $108 gone on an ordinary down day. The same money in an index fund would have lost about $61.

NVIDIA did the same on up days. The index gained 0.64% on an average up day, and NVIDIA gained 1.15%. On $10,000 of NVIDIA, that is about $115 on an ordinary up day. The same money in an index fund would have gained about $64.

NVIDIA’s swings were also wider across the whole year. Volatility measures how widely a price swings over a year. NVIDIA’s volatility over the past year was 37.7%, against 13.0% for the index. NVIDIA also moved about 1.89% for each 1% the index moved, a measure known as beta. So NVIDIA adds to the market risk you already have. NVIDIA does not steady that risk.

Are NVIDIA’s Big Swings Likely To Last?

Probably, because NVIDIA still depends on one kind of customer spending. That spending is on AI data centers. NVIDIA’s data…