Nvidia ‘Bubble’ Talk Spreads to ESG Investors Who Rode Highs

Concerns that Nvidia Corp.’s stratospheric gains might be unsustainable have spread to ESG investment managers who beat the market last year by betting big on the stock.

“I’m optimistic in the long run, but recognize that the valuation isn’t exactly attractive,” said Kristofer Barrett, who oversaw a decision to make Nvidia the biggest holding in Swedbank Robur Technology last year, transforming it into the top performer in a Bloomberg ranking of ESG funds. The Swedbank fund, which is registered as “promoting” environmental, social and governance metrics under European Union rules, returned 53% in 2023.

But there’s now some concern that Nvidia may end up a victim of its own success, according to Barrett.

There’s a “realization that this has become a retail stock,” he said. “And that portends a bubble, potentially.”

Overall, the proportion of ESG funds holding Nvidia shares dropped to 15% of the total at the end of December from a high of 20% in the second quarter of 2023, according to fresh data provided by Morningstar Direct.

The figures, which cover equity-oriented open-end and exchange-traded funds that satisfy Morningstar’s ESG criteria, show that the value of those funds’ exposure to Nvidia was roughly $17.6 billion at the end of last year, down about 10% from the middle of 2023. In the same period, Nvidia’s market value rose 17%.

Nvidia's Stratospheric Growth