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Nvidia Could Reach 15% of S&P 500, Surpassing Microsoft and Apple, Says Evercore ISI

Nvidia could represent 15% of the S&P 500, driven by a 200% market value surge and dominant AI chip demand.

6/10, 09:44 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
Apple Inc.
Microsoft Corporation
NVIDIA Corporation
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Key Takeaway

  • Nvidia (NVDA) could potentially reach a 15% weighting in the S&P 500, surpassing current leaders Microsoft (7%) and Apple (6.4%).
  • Nvidia's market value surged over 200% in the past year, now contributing to 37% of the S&P 500’s year-to-date return.
  • Evercore ISI recommends buying Nvidia shares, citing its dominant position in AI and parallel processing technology.

Nvidia's Potential Market Dominance

Nvidia (NVDA) is on a trajectory to potentially dominate the U.S. stock market benchmark S&P 500 in an unprecedented manner. According to chip analyst Mark Lipacis from Evercore, Nvidia could eventually represent 10-15% of the S&P 500. This projection is based on historical trends where dominant technology companies have increasingly captured larger weightings in the index. For instance, Digital Equipment Corporation held 1% during the mini-computer era, Nokia reached 2% with the rise of cell phones, and Apple achieved 4% in 2015 due to the smartphone boom. Currently, Microsoft leads with a 7% weighting, followed by Nvidia at 6.6% and Apple at 6.4%, according to FactSet data.

Lipacis argues that Nvidia's dominant position in the parallel processing chip, software, hardware, and networking ecosystem could propel it to a 15% weighting in the S&P 500. "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," Lipacis wrote. Nvidia's market value has surged over 200% in the past 12 months, pushing its market cap above $3 trillion, and it is responsible for about 37% of the S&P 500's year-to-date 12% return.

Market Reactions and Stock Splits

Nvidia's recent 10-for-one stock split has generated significant market interest, with Evercore ISI strategist Julian Emanuel suggesting that such splits often lead to initial rallies followed by volatility. This pattern has been observed in other tech giants like Amazon, Tesla, and Apple. Emanuel notes that these post-split selloffs often present "generational buying opportunities," as seen with Amazon's 80% gain post-split and Microsoft's long-term growth since its first split in 1987.

From a technical perspective, Evercore’s head of technical analysis, Rich Ross, believes Nvidia's breakout above $1,000 per share (or post-split $100) has "unlocked the door" to $1,500 (now $150). This bullish sentiment is supported by Nvidia's strong fundamentals and its pivotal role in the current parallel processing/internet of things era. "The result is a stock which offers returns of the 100x to 1,000x ‘bagger’ range and whose peak return is not often fully realized until the next computing era has started," Emanuel writes.

Free Cash Flow and AI Demand

Nvidia's expected free cash flow (FCF) over the next two years underscores its immense potential. Wall Street analysts project Nvidia's FCF to rise to $78.7 billion in 2025 and $91.1 billion in 2026, surpassing Microsoft's. This growth is driven by the surging demand for Nvidia’s AI chips, as software companies increasingly rely on these processors to power their AI models. "The stat that really blew my mind is that the forecast cash flow for Nvidia for 2026 is higher than Microsoft," said Yuri Khodjamirian, CIO at Tema ETFs.

Khodjamirian emphasized Nvidia's industry leadership, noting its annual product announcements that set the pace for competitors. Despite some concerns about the revenue potential from AI software, Anthony Ginsberg, CEO of Gins Global, remains optimistic. He believes AI is accelerating the adoption of cloud services, benefiting companies like Google Cloud and Microsoft Cloud. "If you’re a CEO and don’t have an AI mission, you’re gonna get clobbered," Ginsberg told CNBC Pro.

Street Views

  • Mark Lipacis, Evercore (Bullish on Nvidia):

    "History suggests NVDA could become 10-15% of S&P 500... We have observed that at each successive computing era, the ecosystem players represent a larger weighting of the S&P 500."
    "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."