US stocks or US ETFs: Should Indian investors buy NVIDIA directly or invest through Nasdaq 100 funds?

NVIDIA directly or through Nasdaq 100 ETFs?

Consider an investor who wants exposure to NVIDIA, one of the prominent companies in the artificial intelligence and semiconductor industry. One option is to purchase NVIDIA shares directly. This gives the investor direct exposure to the company’s stock performance, earnings growth and business prospects.

However, it also brings concentration risk. If NVIDIA faces slowing demand, increased competition, regulatory challenges or disappointing earnings, the investor’s portfolio could be significantly affected.

An alternative is investing through a Nasdaq 100 ETF, such as Invesco Nasdaq 100. The index comprises 100 of the largest non-financial companies listed on the Nasdaq Stock Market, offering exposure to multiple businesses rather than depending on one company’s performance.

According to Akshay Falgunia, Fund Manager at PPFAS GIFT, the Nasdaq 100 provides greater exposure to technology and biotechnology businesses. However, its sector concentration can also result in higher volatility.

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US stocks vs US ETFs: Key differences for Indian investors

Investment option	Exposure	Diversification	Key risk
NVIDIA shares	Direct exposure to NVIDIA	Low; single-company investment Advertisement	Company-specific risk
Nasdaq 100 ETF (Invesco)	100 large non-financial Nasdaq-listed companies	Higher than individual stocks, but technology-heavy	Sector concentration and volatility
S&P 500 ETF (Vanguard / SPDR)	Around 500 leading US companies	Broad sector diversification	Overall US market risk
VanEck Semiconductor ETF	Semiconductor companies	Diversification within one industry	Sector-specific risk

S&P 500 or Nasdaq 100: Which offers better diversification?

The S&P 500 comprises approximately 500 leading US companies across multiple sectors. According to Falgunia, these companies collectively represent more than 40% of global stock market value, making the index a broad-based option for international exposure.

The Nasdaq 100, in contrast, is more concentrated in technology and innovation-driven businesses. While it may appeal to investors seeking exposure to artificial intelligence and other emerging technologies, it also carries greater sector-specific risks.

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Falgunia told Livemint that the S&P 500 as a starting point for investors seeking broad international diversification, while the Nasdaq 100 may suit those comfortable with higher volatility.

Investors seeking more focused semiconductor exposure can also consider sector-specific ETFs such as VanEck Semiconductor. However, these funds carry higher industry concentration risk than broader market indices.

How much should investors allocate to US stocks and ETFs?

Falgunia suggests that Indian investors beginning their international investment journey could consider allocating around 10% of their equity portfolio to overseas investments. This allocation could gradually increase to approximately 25-33% as investors become more comfortable with international markets.

For instance, an investor with an equity portfolio of ₹10 lakh could initially allocate ₹1 lakh to international investments. Increasing the allocation to 25% would mean investing ₹2.5 lakh overseas.

These are broad allocation suggestions, not fixed recommendations for every investor.

What about costs and taxation?

Indian residents investing directly in US stocks and ETFs must account for currency conversion charges, bank remittance fees and applicable taxes. Overseas remittances are governed by the Reserve Bank of India’s Liberalised Remittance Scheme (LRS), which permits up to $250,000 per financial year for permitted transactions.

Investors must also consider capital gains taxation, dividend taxation, US withholding tax and foreign asset disclosure requirements in India. The applicable tax treatment can differ between directly held foreign shares, overseas ETFs and Indian-listed international funds.

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Ultimately, buying NVIDIA directly may suit investors comfortable with company-specific risks, while Nasdaq 100 ETFs offer exposure to a basket of technology-led businesses. For those prioritising broader diversification, the S&P 500 could be a more suitable starting point. The decision should depend on portfolio concentration, investment horizon and risk tolerance rather than the popularity of individual US stocks.