The biggest momentum ETF has lost its mojo by exiling the world’s only $4 trillion company
If you asked random people on the street — even those with only a passing interest in the stock market — what the most important and successful stock in the US has been lately, I’m guessing you’d get one answer that would stand head and shoulders above the rest:
It’s Nvidia, duh. The world’s only $4 trillion market cap company. And it got to be that way by being a stock that went up, a lot, very consistently. In other words, it was an obvious momentum stock.
Yet, when the iShares MSCI USA Momentum Factor ETF rebalanced its portfolio near the end of May, the chip designer was excluded from the ETF for the first time since Q1 2023. Nvidia had been in the top six holdings of the fund from Q2 2023, when its blockbuster earnings in May unofficially kicked the AI boom into high gear, through Q1 2025. And now, it’s gone.
The fund clearly is missing out on this loss of a former stalwart: quarter to date, Nvidia is up 8% in breaching the $4 trillion threshold, with its latest rally spurred by the easing of AI chip sales to China, while MTUM is down 1%.
MTUM’s constituents are determined by an algorithm that selects the stocks with the best risk-adjusted price momentum. It cannot be denied that there was a long period of time when Nvidia simply failed to demonstrate much momentum, and did experience some massive volatility. Shares were basically flat from late October 2024 through late June 2025, amid major drawdowns fostered by the DeepSeek freak-out and meltdown in momentum stocks that slightly preceded the subsequent tariff threats and announcements.
It’s easier to be correlated with something when you’re a part of its whole. And Nvidia is charting a distinctly different path now that it’s been cast out of the group.
The 21-session correlation between the daily swings in Nvidia and MTUM has dropped off monumentally, back down to (you guessed it) the lows it saw around the time it was last being added to the fund.
