Apple, Microsoft, and the rest of big tech have gotten too big for the Nasdaq 100 index. Unfortunately, the Nasdaq 100’s solution, a “special rebalance,” is a problem for the market’s “Magnificent Seven.”
Nasdaq has announced plans for a “special rebalance” of the weightings on the Nasdaq 100 later this month to address “overconcentration” in the index. That’s no minor development: According to Nasdaq, there was more than $300 billion in exchange-traded funds tracking the index as of the end of 2021, and the total now is no doubt considerably higher. The Invesco QQQ ETF (QQQ), which tracks the Nasdaq 100, alone has over $200 billion in assets. In effect, indexers will need to sell some of their holdings in the largest constituents of the index, and add to their positions in other stocks.
The Nasdaq 100 is up 37% this year, aided by huge gains in the stocks which dominate the index. The largest stocks by current weighting include Microsoft (12.9% of the index), Apple (12.5%), Alphabet (7.4%), Nvidia (7.0%), Amazon (6.9%) and Tesla (4.5%.)
Nasdaq has conducted a special rebalance only twice before—in December 1998 and May 2011. Nasdaq’s rules state that if all stocks with a weighting of more than 4.5% in the index exceed 48%, then Nasdaq rebalances the indicator. Under Nasdaq rules, the rebalancing process sets the aggregate weight of stocks with a weighting of 4.5% or more at 40%.
MacDailyNews Note: The Nasdaq 100’s special rebalance will be based on index and stock prices as of July 3rd. Details will be announced on July 14th, and will go effective on July 24th.
Following that, Apple is set to report fiscal Q323 results on Thursday, August 3rd.
Please help support MacDailyNews. Click or tap here to support our independent tech blog. Thank you!
Support MacDailyNews at no extra cost to you by using this link to shop at Amazon.
