Nvidia's Immense Market Power Is Worrying Investors — Here's Why At one point, Nvidia made up over one-third of the S&P 500's overall returns.

Nvidia has jumped 140% year-to-date — and made up about one-fourth of the entire S&P 500's 17% overall gain. In June, Nvidia had an even higher impact on the index's returns, making up over a third of overall returns.

Demand for the company's AI chips is so high that CEO Jensen Huang says it is his biggest worry.

Related: Why Are Nvidia Earnings So Important? They Could Be a 'Market Mover,' Says Expert

Though Nvidia stock could rally further this week if the Federal Reserve cuts interest rates, any boost could also reinforce concerns about the AI giant's undeniable influence on the index, and what may happen to the market if demand slows or shifts away from Nvidia's AI chips.

^{Nvidia's impact as of June 2024. Graphic by Visual Capitalist via Getty Images}

When Nvidia stock fluctuates, it noticeably impacts the broader market; Nvidia's drops accompany declines in markets overall.

For example, a low point earlier this month wiped out over $10 billion of Nvidia CEO Jensen Huang's personal wealth in one day and over $279 billion of the company's overall market capitalization. The Nasdaq also dropped by 3.3% and the S&P 500 by 2.1% that day.

In contrast, when shares grew over 30% across the two weeks ending August 21, Nvidia's market capitalization grew by $750 billion and lifted the Nasdaq by over 7%.

Swings in Nvidia's stock price "could influence broader indices like the Nasdaq 100 and S&P 500, given their strong correlation with Nvidia shares," Lukman Otunuga, senior market analyst at online trader FXTM, told Entrepreneur in an email before Nvidia's second-quarter earnings report in August.

Related: Nvidia CEO Jensen Huang's Biggest Worry Shows that Success Has a Downside

Nvidia's performance has a deeper impact: It affects investors' perceptions of AI demand as a whole. The four companies that comprise over 40% of Nvidia's profits are Amazon, Google, Meta, and Microsoft — so if Nvidia's earnings are up, interest in AI parts among major players is too.

Nvidia posted second-quarter profits of $16.6 billion last month, beating expectations of $15 billion. It had its fourth quarter in a row of triple-digit growth.

The AI chipmaker had a market cap of around $2.866 trillion at the time of writing and was the third-largest company by market cap in the world.