The Nasdaq 100 is planning a special rebalancing to limit the dominance of the “Magnificent Seven”

The Nasdaq 100 is set to weigh its 100 components, with the ‘Magnificent Seven’ stocks Microsoft (MSFT), apple, nvidia (NVDA), Tesla (TSLA), a parent from Google the alphabet (Google), Meta platforms (meta) And (AMZN) currently accounts for more than half of the index’s weight.


And the Magnificent Seven stocks fell significantly on Monday.

A special rebalancing of the Nasdaq 100 will take place before the market opens on Monday, July 24, in order to “address excessive concentration in the index through a reallocation of weights.”

Weighting changes will be announced on Friday 14 July. No inventory will be added or removed.

The Nasdaq 100 index includes the 100 largest non-financial components of the Nasdaq index.

How is the Nasdaq 100 index weighted?

The Nasdaq 100 is a market capitalization index. Market assessment is the biggest factor, but with a methodology to reduce excessive focus.

The Nasdaq 100 weights out an impressive seven

a company tape Weight Market cap, in trillions (as of July 7)
Microsoft MSFT 12.9% $2.51
apple AAPL 12.5% $2.99
nvidia NVDA 7.0% $1.05
Amazon AMZN 6.9% $1.33
Tesla TSLA 4.5% $0.87
Meta platforms meta 4.3% $0.75
the alphabet Google 3.7% $1.52
the alphabet Google 3.7%

The seven largest companies in the Nasdaq 100 index account for 55% of the index. It seems likely that this aggregate weighting will be reduced. It is also possible that there may be noticeable weight shifts within these seven giants.

Current weights show that market capitalization is the dominant factor, but it is not the only factor.

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Microsoft stock has the most weight, at 12.9%, as of July 7. Apple’s stock weights 12.5%, even though Microsoft has a market capitalization of $2.999 trillion versus $2.51 trillion.

Google stock has a weight of 7.4% with the two share classes GOOGL and GOOG together.

Nvidia stock jumped to 7% in the Nasdaq 100, thanks to a market capitalization of $1.05 trillion. That’s a little more weight than Amazon stock (6.9%), though the latter has a much 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 weighed 11.4% as of July 7 while Microsoft was down 9.5%. GOOGL was up 5.8% while Amazon and Nvidia were up 5.1% and 4%, respectively. He owns TSLA stock 3.3% and META stock 2.8%.

How much is the Nasdaq 100MP discount?

Based on Nasdaq 100 methodologyThe combined weight of the five companies with the largest market caps will be set at 38.5%. The combined weight of the top five companies, Apple, Microsoft, Google, Amazon and Nvidia, was 46.7%. That points to some notably low weights for these names.

Meanwhile, no component outside of the top five companies by market capitalization can have the Nasdaq 100 exceed by less than 4.4% or the weight of the stock with the fifth largest market valuation. That indicates at least a slight decrease in the weighting of TSLA’s stock.

The official re-weighing should be released on Friday, possibly after closing. This will also include stocks that will see an increase in weights.

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Magnificent Seven shaved in 2023

Invesco QQQ ETF (QQQ), which measures the Nasdaq large-cap index, was up 37.5% in 2023 through July 7.QQEW), which gives equal weight to all 100 stocks, rose just 18.8%.

This largely reflects huge moves by huge companies this year. NVDA stock has nearly tripled (191%). META stock is up 141% while TSLA stock is up 123%. AMZN stock jumped 54.5%. AAPL stock is up 47% and MSFT stock is up nearly 41%. Google stock is still strong at 35%.

There is some concern that this handful of names is distorting the overall health of the stock market, likely spurring private rebalancing.

Will the rebalancing of the Nasdaq 100 Index affect stock prices?

The Nasdaq-100’s own rebalancing will spur stock allocation shifts between ETFs like the QQQ and mutual funds that track the index. So there could be some one-off wins or losses, perhaps with the planned changes announced on July 14th.

However, the effects may be modest. First, the large-cap NASDAQ will adjust the weights, as opposed to complete addition or subtraction. Also, there is a lot more money tracking the S&P 500, which is why component changes in the S&P 500 get so much more attention than moves in the Nasdaq 100.

The S&P 500, unlike the Nasdaq 100, is a pure market capitalization weighted index.

Most of the “Magnificent Seven” stocks fell on Monday. Nvidia stock fell just 0.8%, while Apple stock dropped 1.1%. more than 1% during the day. Microsoft shares fell 1.6%, TSLA fell 1.8% and Amazon fell 2%. GOOGL stock sank 2.5%.

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The one exception: META stock is up 1.2%, as Meta’s new threading app surpassed 100 million subscriptions in less than a week.

Megacaps affected the Nasdaq 100, which fell on the day before making gains. QQEW equal weight jumped 1.8%.

Please follow Ed Carson on Twitter at @tweet For stock market updates and more.

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