Year-to-date gains through Nov. 3 were 20.20% for Morningstar’s U.S. Technology Index and 11.77% for its U.S. Total Market Index, figures that do not show a portfolio’s reliance on artificial intelligence demand.
The comparison covers a sector benchmark and a broad-market benchmark. It gives no details about the companies in a wide-moat portfolio, the proportions invested in them or the demand factors that might connect those businesses.
Morningstar revised the Wide Moat Focus Index methodology on June 20, 2016. Before the revision, it held 20 stocks; the new rules set a minimum of at least 40 and also changed constituent selection and rebalancing. The stated aims were to spread investments more broadly, reduce constituent churn and keep holdings longer.
The index’s screen considers company-level qualities: sustainable competitive advantages and attractive prices. Those criteria help determine which firms qualify, but do not measure whether the businesses ultimately selected rely on separate markets or similar sources of demand.
Nvidia illustrates the distinction. Morningstar’s assessment of the company’s competitive position draws on its graphics processors, CUDA software platform and networking capabilities. Those strengths do not determine how demand for AI infrastructure may change. Large technology customers are also pursuing other suppliers and developing chips in-house, adding a competitive consideration for Nvidia.
A company’s advantages and a portfolio’s exposure describe different things. To assess concentration, investors would need to look at which companies are held, how much of the portfolio each represents and whether their businesses depend on related demand. A higher minimum roster can add names without showing whether those companies respond to distinct economic forces.
