According to the information obtained by Cnstock, one of the world's most famous technology ETFs seems to be ready to make a major adjustment, increase its exposure to Nvidia (NVDA. Us), reduce its exposure to Apple (AAPL. Us), and may stimulate hundreds of billions of dollars of transactions from Apple to Nvidia.

State Street Global Advisors will adjust the 71 billion US dollars Technology Select Sector SPDR Fund (XLK. Us) portfolio after Nvidia's market value exceeded Apple's. The new proportion shows that Microsoft (MSFT. Us) is still the preferred stock, followed by Nvidia, and then Apple. According to Bartolini, XLK will be rebalanced according to its rules and methods. ETFs are required to track the S&P benchmark index, which is designed to comply with diversification regulations. He said that these rules are "beneficial to investors".

SPDR is the ETF unit of State Street Global Advisors, focusing on tech stocks. XLK AUM exceeds $71.2 billion, making it the second largest SPDR fund after the $534.8 billion SPDR S&P 500 ETF (SPY. Us).

XLK has significantly reduced its holding of Nvidia shares in the past few months, despite the AI giant's 166% surge so far this year. When the chip maker is third in terms of market value, it accounts for about 6% of the ETF assets, while the weight of the S&P 500 Information Technology Index is 22%. Holding restrictions set by diversification rules have caused XLK to underperform significantly this year.

Although S&P theoretically reserves the right to make exceptions, industry insiders said the ETF will re-adjust tools when it implements quarterly rebalancing around the end of June. Based on the calculation results provided by the index providers to three informed market participants, Apple and Nvidia will change their positions in the ETF. The weight of the former will drop to 4.5%, and the latter will rise to more than 20%.

It is estimated that State Street Bank will buy $11 billion worth of Nvidia shares and sell $12 billion worth of Apple stocks. This is not insignificant-the expected reduction in Apple stock is equivalent to its daily trading value in the past three months.

Chris Harvey, director of stock strategies at Wells Fargo Securities, said:"Based on our calculations, the'flip-flops' between Nvidia and Apple will occur, which will make the XLK ETF more closely linked to momentum trading and the semiconductor market. Marginalized stocks are one of the most reliable strategies in the hedge fund industry for buying stocks entering major indices and selling stocks exiting these indices. ".

According to a document released last week, S&P can still make exceptions when announcing industry weights at the end of the month. S&P wrote in a report on rebalancing in June that the Index Committee "reserves the right to apply this method in exceptional cases". "In any case, if a deal differs from the general rules specified in this document or supplementary document, the customer will receive notice as much as possible."

S&P said it will send so-called formal documents to customers related to industry index rebalancing every day before Friday. Any behavior that deviates from the public method at the last minute will not be accepted by traders, who tend to build positions when they expect index rebalancing may be revised. Although the market is becoming more crowded, buying stocks entering major indices and selling stocks exiting these indices has become one of the most reliable strategies in the hedge fund industry.

What supports the significant adjustment of the weight of these two companies in the ETF can be traced back to the diversified investment rules established more than 80 years ago, which are designed to protect investors from concentration bets. According to these regulations, the total shareholding of the largest companies (that is, companies with a shareholding of 5% or more in a diversified fund) cannot exceed 50%.

Last year, similar restrictions prompted regulators of the Nasdaq 100 Index to conduct a special rebalancing to ensure that index-tracking funds comply with regulations. When this rule is broken, indices such as the Nasdaq 100 index will often reduce their holdings of top stocks in proportion. The method of XLK is different. When many stocks do not meet the rules, the stock with the smallest proportion is cut off.

The unique pattern is the reason for XLK's significant shareholding of Nvidia, causing the fund to lag more than 5 percentage points behind the traditional S&P 500 technology category index this quarter, the largest gap since 2001. Nvidia's market cap has caught up with Apple and Microsoft in scale in recent weeks, and as the weights of some of the world's most watched technology companies may fluctuate, XLK's upcoming adjustments have piqued Wall Street's interest.

Bloomberg ETF analyst James Seyffart said,"I'm curious to see if they'll keep the rules unchanged in the next rebalancing in September.If Apple manages to overtake Nvidia or Microsoft on the next rebalancing reference date, which is September 13, we may have a mirrored large-scale rebalancing with Apple bought for billions of dollars and Nvidia or Apple sold for billions of dollars."