Broadcom’s Growing Influence in S&P 500 Index Funds

Broadcom (AVGO) has quietly become a significant player in the S&P 500, now accounting for over 2.5% of the index's weighting. This marks a substantial increase from its position just a year ago, driven by passive investing flows that automatically allocate capital to the stock as its market cap grows.

The chipmaker's financial performance underscores its rise: earnings per share have grown at an 18% annual clip over three years, with EBIT margins expanding from 31% to 40%. Insiders hold $20 billion worth of shares, demonstrating strong alignment with shareholders, while CEO compensation remains modest at $2.6 million—well below the $13 million median for comparable companies.

Broadcom's ascent reflects the concentrated nature of modern index investing, where nearly 20% of the S&P 500's weighting comes from just three stocks: NVIDIA, Microsoft, and Apple. The company benefits from the disproportionate flows into large-cap growth funds, where capital increasingly clusters around market leaders.