Chipmaker Nvidia (NASDAQ: NVDA) has seen significant growth in the past year, with shares more than tripling. However, some hedge fund billionaires have decided to reduce their positions in Nvidia and reallocate capital to two high-growth index funds, the Invesco QQQ Trust (NASDAQ: QQQ) and the iShares U.S. Technology ETF (NYSEMKT: IYW).
Israel Englander of Millennium Management sold 1.7 million shares of Nvidia in the fourth quarter, reducing his stake by 45% while increasing his position in the Invesco QQQ Trust by 53%. John Overdeck and David Siegel of Two Sigma Investments also trimmed their Nvidia stake by 5% and increased their positions in both the Invesco QQQ Trust and the iShares U.S. Technology ETF.
These index funds have outperformed the S&P 500 over the last 10 years. The Invesco QQQ Trust returned 440%, while the iShares U.S. Technology ETF soared 528%.
The Invesco QQQ Trust tracks the Nasdaq-100, heavily weighted towards information technology and consumer discretionary sectors. The top positions include Microsoft, Apple, Nvidia, and others. The fund has outperformed the S&P 500 over the last two decades, compounding at 14.3% annually.
The iShares U.S. Technology ETF includes 131 stocks in the information technology sector, with top positions in Microsoft, Apple, Nvidia, and others. This fund has also consistently outperformed the S&P 500, compounding at 13.8% annually over the last two decades.
While these index funds offer high growth potential, they come with volatility. The Invesco QQQ Trust has a three-year beta of 1.19, while the iShares U.S. Technology ETF has a beta of 1.24. Additionally, the expense ratio for the Invesco QQQ Trust is 0.2%, and the iShares U.S. Technology ETF is 0.4%.
Investors looking for exposure to the technology sector may also consider the Vanguard Information Technology ETF (NYSEMKT: VGT), which has a lower expense ratio of 0.1% and has performed slightly better over the last two decades.
In conclusion, while some billionaires are selling Nvidia stock, investing in high-growth index funds like the Invesco QQQ Trust and the iShares U.S. Technology ETF can offer significant returns over the long term.