• NVIDIA identified as the most under-owned megacap tech stock with a -2.57% gap between its S&P 500 weighting and active institutional ownership.
  • Megacap tech overall is the most under-owned sector in 17 years at -155 basis points, with investors favoring AI hardware over software.
  • Institutional ownership stands at 52.8%-70%, led by major asset managers, amid strong financial performance and AI-driven demand.

NVIDIA Corporation (NVDA), the semiconductor giant specializing in GPUs for AI, gaming, and data centers, has been flagged by Morgan Stanley as the most under-owned megacap tech stock, according to recent analysis. The firm reports a -2.57% gap between NVIDIA's S&P 500 weighting and active institutional ownership as of late 2025 data, surpassing gaps for Apple (AAPL) (-2.16%), Microsoft (MSFT) (-2.13%), and Amazon (AMZN) (-1.37%). This places megacap tech as the most under-owned sector in 17 years, with a -155 basis-point gap versus the index, highlighting a cautious investor stance in a high-interest-rate environment.

Efforts to understand the shift have revealed mixed institutional moves. While some funds trimmed stakes—such as Investment House LLC reducing its position by 1.7% to 456,000 shares and JPMorgan (JPM) cutting by 6.65%—others boosted holdings, with UBS increasing by 22.94% and Capital Research adding 3.74%. Overall, institutional ownership ranges from 52.8% to 70% of shares, led by Vanguard with 2.27 billion shares valued at $423 billion, BlackRock with 1.94 billion shares at $363 billion, and State Street with 991 million shares at $185 billion as of December 2025. Insiders have offloaded 1.61 million shares worth $292 million over 90 days, including CFO Colette Kress selling 20,000 shares and Director Harvey C. Jones selling 250,000 shares, reducing insider holdings to 4.17%.

Without a broader rebalancing, the under-ownership gap could pressure institutional investors to increase stakes, potentially benefiting NVIDIA shareholders. The company's strong financial performance supports this outlook: NVIDIA reported Q3 revenue of $57.01 billion, up 62.5% year-over-year, with earnings per share of $1.30 beating estimates of $1.23. Analysts maintain a positive view, projecting an average price target of $264.20 and forecasting EPS growth to $4.41 in FY2026, a 50.5% increase, and $6.79 in FY2027, up 54%. Sources close to the matter suggest that NVIDIA's Blackwell AI chips and data center solutions, driving AI infrastructure, position it as a key proxy for corporate AI investments amid global data center expansion.

Investors are tilted toward AI hardware names, while software stocks remain relatively under-owned, according to Morgan Stanley's findings. This bias tilts portfolios toward NVIDIA-like plays, potentially widening gaps for retail investors seeking alternatives in private markets. In a brief statement, an anonymous analyst noted, 'NVIDIA is becoming a 2026 pressure point and anchor stock, with Wall Street unanimity centering it for AI capex trends.' Attempts to reach NVIDIA for additional comment were unsuccessful.

Looking ahead, the stock could hit $275 on Blackwell shipments and $65 billion in Q4 data-center revenue, analysts say. The under-ownership dynamic echoes patterns from the 2000s dot-com era, where tech megacaps faced similar gaps before rallies, though current trends stem from post-2023 AI hype and valuation concerns. As regulatory factors like U.S. export controls on AI chips to China linger, NVIDIA's role in the AI boom remains pivotal, with its market cap implied to exceed $3 trillion based on institutional holdings.

Correction: An earlier version misstated the EPS growth projection for FY2027; it is 54%, not 50%. This has been updated.