The Nasdaq 100 index is set to adjust the weighting of its 100 components, with the “magnificent seven” stocks Microsoft (MSFT), Apple, Nvidia (NVDA), Tesla (TSLA), Google parent Alphabet (GOOGL), Meta Platforms (META) and Amazon.com (AMZN) currently accounting for more than half the index’s weight.
The Nasdaq 100 special rebalance will take place before the market open on Monday, July 24, to “address overconcentration in the index by redistributing the weights.”
The weighting changes will be announced on Friday, July 14. No stocks will be added or removed.
The Nasdaq 100 includes the 100 largest non-financial Nasdaq components.
How Is the Nasdaq 100 Weighted?
The Nasdaq 100 index is a modified market-capitalization index. Market valuation is the largest factor, but with methodology to limit overconcentration.
Nasdaq 100 Weights Of Magnificent Seven
|Company||Ticker||Weight||Market cap, in trillions|
The seven-largest companies in the Nasdaq 100 account for 55% of the index. It seems likely that this combined weighting will be reduced. It’s also likely that there may be notable weighting shifts within these seven giants.
The current weights show that market capitalization is the dominant factor, but it’s not the only one.
Microsoft stock has the largest weight, at 12.9%, as of July 7. Apple stock has a 12.9% weight, despite having a $2.999 trillion market cap vs. Microsoft’s $2.51 trillion.
Google stock has a 7.4% weighting with the GOOGL and GOOG share classes combined.
Nvidia stock has vaulted to a 7% Nasdaq 100 weighting, thanks to its $1.05 trillion market cap. That’s a slightly larger weight than Amazon stock (6.9%), even though the latter has a significantly higher valuation at $1.33 trillion.
Tesla stock and Meta Platforms round out the top-seven members, with weights of 4.5% and 4.3%, respectively.
Just for reference, for the entire Nasdaq composite, Apple stock has an 11.4% weighting while Microsoft is at 9.5%. GOOGL stock is at 5.8% while Amazon and Nvidia are at 5.1% and 4%, respectively. TSLA stock has 3.3% share and META stock is at 2.8%.
Magnificent Seven Soar In 2023
The Invesco QQQ ETF (QQQ), which tracks the big-cap Nasdaq index, is up 37.5% in 2023 through July 7. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW), which gives an equal weight to all 100 stocks, is up just 18.8%.
This largely reflects massive moves by megacaps this year. NVDA stock has nearly tripled (191%). META stock has soared 141% while TSLA stock is up 123%. AMZN stock has leapt 54.5%. AAPL stock has run up 47% and MSFT stock nearly 41%. Google stock is up a still-robust 35%.
There is some concern that this handful of names is distorting the health of the overall stock market, which is likely what’s spurring the special rebalancing.
Will Nasdaq 100 Special Rebalance Affect Stock Prices?
The Nasdaq 100 special rebalance will spur stock allocation shifts among ETFs such as QQQ and mutual funds that track the index. So there could be some one-off gains or losses, perhaps as the planned changes are announced on July 14.
However, the impacts may be modest. For one, the big-cap Nasdaq index is going to adjust weightings, vs. a full addition or deletion. Also, far more money tracks the S&P 500, which is why S&P 500 component changes get a lot more attention than Nasdaq 100 moves.
The S&P 500 index, unlike the Nasdaq 100, is a pure market-cap weighted index.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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