Your Funds Quietly Made A Big Bet On AMD

Without choosing a single stock, you may have ended up with a concentrated position in one of the market’s most stretched names.

Advanced Micro Devices (AMD), a key designer of semiconductor chips, is held across 65 of the equity funds in our universe, often in size. After a powerful run-up, you may own a lot more of this one company than you realize, not because you bought the stock, but because your funds did.

How Stretched Has This Position Become?

The stock’s recent performance has been remarkable. Over the past year the stock has returned +297%, with much of that coming in the last three months, which saw a +166% return. That move has left AMD trading about 96% above its 200-day moving average. Investors are pricing in high expectations, with the stock trading at about 72 times its expected earnings for the year ahead, supported by forecasts that see profits forecast to grow about 55% a year.

Which Of Your Funds Are Riding It?

This concentration has been a major driver of returns for some popular funds. The iShares Semiconductor ETF (SOXX), for example, holds about 7.7% of its assets in AMD and has returned +153% over the past year. The ARK Autonomous Technology & Robotics ETF (ARKQ) holds a 7.1% position and returned +51% over the same period. The very concentration that powered those gains is now a source of single-stock risk you never actively chose to take on.

What A Simple Reversion Could Cost

This is not a prediction, but a scenario to make that risk concrete. If AMD simply fell back to its 200-day average, the stock would drop about 49% from its current price. For the funds carrying it, the math is direct. A fund like iShares Semiconductor ETF (SOXX) would lose about 3.8% of its value from this one holding alone. For the ARK Autonomous Technology & Robotics ETF (ARKQ), the loss would be about 3.4%. And for the ARK Next Generation Internet ETF (ARKW), which holds AMD at about 8.7% of the fund, the hit would be about 4.3%.

Worse, this exposure is sticky. You can’t surgically sell just the AMD shares inside your ETF. To reduce your position, you have to sell the entire fund, which could trigger a taxable capital gain, locking in the very exposure you might want to trim.

A Way To Keep The Theme With Less Risk

There are other ways to invest in the same theme with less concentration. The State Street SPDR S&P Semiconductor ETF (XSD), for instance, holds AMD at about 2.6% of the fund. That is a much smaller position than the roughly 8% in iShares Semiconductor ETF (SOXX). While its return was slightly different, at +133% over the past year versus +153% for SOXX, it offers exposure to the same industry with significantly less weight on this one high-flying name.

The point isn’t that AMD is destined to fall. It’s that after a historic run, it has quietly become a major position in portfolios that were meant to be diversified. The first step is simply to see the exposure for what it is.

How Do You Find A Better-Balanced Fund?

Whether this is a name you are happy to keep riding or one you would rather not own quite so much of, the first move is the same: see your true exposure to it, then find funds that carry the same theme with less of any single stock. A fund’s name tells you almost nothing about how concentrated it has quietly become.

Our ETF Valuation and Performance Scorecard ranks the major ETFs side by side on valuation, return, and risk, so you can see which funds lean hardest on a handful of names and which spread the exposure while keeping the performance.

Is There A Cleaner Way To Invest?

And if the whole problem, a winner quietly growing into an outsized, hard-to-trim position you never sized on purpose, is something you would rather avoid by design, there is another way to think about it. An index fund holds whatever its benchmark dictates and never trims a winner for you, so concentration builds silently until a pullback does the trimming.

Our High Quality (HQ) Portfolio takes the opposite approach: rule-based, multi-factor selection across different kinds of businesses, rebalanced on a schedule, so winners get trimmed and no single name quietly becomes the whole position. It has a record of outpacing a benchmark that combines the three major indices – the S&P 500, S&P Mid-cap, and Russell 2000.