Content courtesy of Dimensional Fund Advisors. Author is Matt Lipps, CFA, Investment Strategist.
Nvidia, at more than $4 trillion in market capitalization, is the largest stock to ever exist. The company’s quarterly earnings announcements have become Super Bowl-like events. In its August 2025 release, Nvidia reported past 12-month earnings that were over 60% higher than this time last year, compared to an approximately 14% rise for combined S&P 500 earnings over the same period. Despite this, the stock fell slightly the next day.
Nvidia’s earnings were immense, but the price tag for those earnings is steep. As of August 31, 2025, Nvidia’s market cap made it nearly 8% of the S&P 500 Index. Its last 12 months of earnings were $87 billion, or around 4% of the approximately $2 trillion in total S&P 500 Index earnings. For investors seeking higher returns, the company’s size and high valuation relative to peers suggest that markets continue to price in high future cash flows, lower expected returns, or a combination of both. As a result, even when Nvidia announces eye-wateringly high earnings, its price may still drop.
Stock prices are an investor’s most valuable source of information and contain the market’s aggregated outlook for a stock’s future. Investors who own the broad market will get a slice of Nvidia, including a claim on Nvidia’s future earnings.
Past performance is not a guarantee of future results.
In USD. Source: FactSet and Dimensional. Index weight and earnings represented by the S&P 500 Index. Nvidia Share of S&P 500 Earnings is Nvidia’s past 12-months of net income, divided by total 12-month net income of current S&P 500 constituents. S&P data © 2025 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.
Source: FactSet. Nvidia market cap as percent of the S&P 500 Index calculated by Dimensional.
Disclosures
All expressions of opinion are subject to change. This information is not meant to constitute investment advice, a recommendation of any securities product or investment strategy (including account type), or an offer of any services or products for sale, nor is it intended to provide a sufficient basis on which to make an investment decision. Investors should consult with a financial professional regarding their individual circumstances before making investment decisions. Diversification neither assures a profit nor guarantees against loss in a declining market.
Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.
Investment products: • Not FDIC Insured • Not Bank Guaranteed • May Lose Value
Dimensional Fund Advisors does not have any bank affiliates.
This information is intended for educational purposes and should not be considered a recommendation to buy or sell a particular security. Named securities may be held in accounts managed by Dimensional.