Even if you never bought a single share of Nvidia, the
steep slide this week could still ding your retirement savings.
uncertain
slide → buy → savings
Nvidia is a component of the S&P 500 and many other indexes, including the Nasdaq 100 and Dow Jones Industrial Average, all popular with retirement savers through funds offered by millions of employer retirement plans.
asserted
all → include → plans
About 97% of retirement plans now offer index funds, up from 79% in 2006, according to March research from the Investment Company Institute and ISS Market Intelligence.
uncertain
% → offer → Institute
That means even if you haven't directly bought Nvidia stock, your 401(k) is likely exposed to the chipmaker through an index fund, such as the SPDR S&P 500 ETF Trust or Vanguard's S&P 500 ETF (which trade under the tickers SPY and VOO, respectively).
asserted
which → mean → tickers
Overall, Nvidia represents about 6% of the S&P 500 index, making it the second-largest component after Apple, according to Yahoo Finance.
uncertain
it → represent → Finance
Nvidia's shares started falling on Monday amid revelations that cofounder Jensen Huang had an extramarital
with a suspected Chinese spy.
asserted
Huang → start → spy
Since Nov. 6, the company's value has declined by more than $550 billion — a decline of about 13% in one week.
asserted
value → decline → week
While that will certainly hurt investors who directly own Nvidia shares, it may also impact people with indirect investments through funds that hold the chipmaker.
uncertain
that → hurt → chipmaker
Nvidia's woes underline the risks inherent in many big tech companies widely held by U.S. investors, Shiva Rajgopal, a Columbia Business School professor who studies corporate governance, told CBS News.
asserted
who → underline → News
The "Magnificent Seven" tech stocks account for about one-third of the S&P 500.
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stocks → account → S&P
As with Nvidia, several of those companies are closely associated with CEOs whom investors see as central to their success, such as Elon Musk at Tesla, Rajgopal noted.
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Rajgopal → associate → Tesla
And as Nvidia's selloff showed this week, trouble for a charismatic CEO can quickly spill over into the company's stock.
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trouble → show → stock
"They are amazing wealth creators for shareholders," Rajgopal said.
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Rajgopal → say → shareholders
"But hopefully, shareholders know what they are doing when they buy the stock of these companies, because the exact same structure also has a lot of fragility built into it.
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structure → know → it
A drag on the S&P 500
The AI industry's influence on Wall Street was evident this week, as turmoil at Nvidia triggered a broader slump in technology stocks.
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turmoil → trigger → stocks
Yet more companies within the S&P 500 rose rather than fell this week, boosting the index by 2.9% for the week through Thursday's close.
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companies → rise → close
Excluding Nvidia, the index would have gained an estimated 3.8%.
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index → exclude → %
"If you check your account today, tomorrow, you're going to see some sort of fluctuation, especially if you own shares of Nvidia," Sabrina Escobar, a reporter at Barron's, told CBS News.
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Escobar → check → News
"The decline we saw over the past couple of days will certainly have some implications in your daily or weekly stock movements.
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we → see → movements
"
For investors, Huang's sudden downfall and Nvidia's wobbly stock highlight the importance of properly diversifying their portfolios, Mercer Advisors chief investment officer Donald Calcagni said in a blog post.
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Calcagni → highlight → post
"Events like this — where the outcome hinges on one company's leadership — are a risk we try to minimize through diversification," he wrote.
asserted
he → hinge → diversification
"This is the core principle behind portfolio diversification strategies: spread your risk broadly enough that no single company's troubles can derail your long-term plan.
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troubles → spread → plan
"
Of course, that's the idea behind holding a broad-based index fund like the S&P 500 — rather than concentrating your money in a handful of individual stocks, you're spreading your bets across hundreds of types of companies.
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you → hold → companies
And the fact that the S&P 500 is on track to post a weekly gain despite Nvidia's turmoil points to how that strategy can pay off.
asserted
strategy → post → turmoil
Timing is not on your side
Investors may be tempted to sell when the market, a stock or a fund tumbles, but research has repeatedly shown that trying to determine the right time to buy or sell an investment usually results in losses.
uncertain
trying → tempt → losses
Meanwhile, tech experts noted that Nvidia's chips remain essential to the artificial intelligence sector, a key competitive edge unlikely to change in the near term even with Huang's abrupt departure.
asserted
chips → note → departure
In other words, holding Nvidia shares may be a way to bet on the broader AI industry, rather than on its executive roster.
uncertain
holding → hold → roster
"When a single company's stock drops on unexpected news, the best response is usually the simplest one: pause, keep the news in perspective and let your diversified portfolio do what it was designed to do," Calcagni said.
asserted
Calcagni → drop → what
The Aporia
