The SPDR S&P 500 ETF Trust has become the first ETF to surpass $500 billion in assets under management, propelled by a remarkable surge in shares of chipmaker Nvidia.

State Street Global Advisors, the issuer of the SPDR S&P 500 ETF Trust, confirmed that the fund's assets have reached approximately $502 billion, making it the largest and most liquid ETF tracking the Standard & Poor's 500 index.

The meteoric rise in Nvidia's shares contributed to the ETF's landmark achievement. Nvidia's substantial weighting in the S&P 500 index, standing at 4.5 per cent, grants it considerable influence over the index's performance. With Nvidia's shares skyrocketing nearly 60 per cent year-to-date and an additional 8.9 per cent surge in the past week following a post-earnings rally, the chipmaker's extraordinary growth has propelled the SPDR ETF to new heights.

Todd Rosenbluth, Chief ETF Strategist at VettaFi, noted, "This is a result of Nvidia climbing to new highs rather than of fresh demand for the ETF." Nvidia's role as one of the "Magnificent Seven" stocks driving market gains this year underscores its pivotal contribution to the S&P 500's performance, which has seen a 6.7 per cent increase year-to-date.

Nvidia briefly reached a market value of $2 trillion for the first time on Friday, fueled by robust demand for its chips, positioning the Silicon Valley giant at the forefront of the artificial intelligence boom.

While the SPDR ETF maintains its dominance in trading volumes and liquidity and topped the list of ETFs with the largest inflows last year, it faces competition from other broad market ETFs. BlackRock Inc.'s iShares Core S&P 500 ETF and Vanguard S&P 500 ETF have emerged as challengers, experiencing faster growth in inflows over the last three years.

Combined, these three ETFs now command approximately $1.35 trillion of the $8.4 trillion total assets invested in ETFs in the U.S., as highlighted by Rosenbluth. As the ETF landscape continues to evolve, driven by transformative market forces and investor preferences, the significance of milestone achievements like the SPDR S&P 500 ETF's $500 billion milestone underscores the enduring appeal and relevance of ETFs in modern investment portfolios.

(With Reuters inputs)