Recently, undoubtedly the most exciting thing for global financial markets is the "hot chicken" phenomenon.$NVIDIA (NVDA.US)$surpassing Apple, became the company with the highest global market cap, which further stimulated people's interest in the AI industry. However, what may be overlooked is that even in the hot US stock market this year, many AI concept stocks that were hyped up last year have fallen this year.$Microsoft (MSFT.US)$, $Apple (AAPL.US)$It has become the world's most valuable company in terms of market cap.

Currently, Nvidia is up nearly 4% in pre-market trading, setting a new historical high at the opening bell.

This month, the title of global market cap number one has changed hands several times between traditional tech giants Microsoft and Apple, but most traders believe that Nvidia's ascent to the throne is only a matter of time. They predict that the GPU manufacturer will be a major beneficiary of the "new industrial revolution". From the trend of the "big three" this year, this view is also confirmed. Apple's stock price has gradually recovered after the WWDC conference, with a cumulative increase of 11% since the beginning of the year; Microsoft, which is closely collaborating with OpenAI, has steadily risen with a cumulative increase of 19%; however, Nvidia's performance is particularly eye-catching, with an astonishing increase of 173% this year, obviously leading the other two tech giants.

Looking at the trend of the "big three" this year, this view is also confirmed: Apple's stock price gradually recovered after the WWDC conference, with a cumulative increase of 11% since the beginning of the year; Microsoft, which is closely collaborating with OpenAI, has steadily risen with a cumulative increase of 19%; however, Nvidia's performance is particularly eye-catching, with an astonishing increase of 173% this year, obviously leading the other two tech giants.

From another perspective, Nvidia's rise is also surprising. It took 96 days for Nvidia's market value to rise from $2 trillion to $3 trillion. By comparison, according to data from Bespoke Investment Group, Microsoft took 945 days and Apple took 1,044 days.

What should investors pay attention to next? This Friday may be a key point.

• Important technology ETF rebalancing, Nvidia may see billions of dollars in buying

The giant ETF SPDR fund, with a scale of up to $71 billion, tracks technology stocks. It will conduct quarterly rebalancing this week to adjust stock weights. The surge in Nvidia's stock price may result in the ETF buying a large amount of Nvidia stocks with a value of over $10 billion while selling Apple stocks worth about $11 billion. The top stock of this index is shown to be Nvidia according to recent calculations, followed by other stocks, and then Apple. Note that under the regulatory S&P Dow Jones Indices method, individual stock weight cannot exceed 24%, and the combined weight of companies occupying 4.8% or more should not exceed 50%. If the total weight of the largest stocks exceeds the cumulative weight limit, the weight of the smallest company will be systematically reduced until it reaches the limit, and the excess weight will be allocated to other smaller companies in the index.$The Technology Select Sector SPDR® Fund (XLK.US)$The quarterly rebalancing will adjust equity weights and take place this week.

Currently, Microsoft and Apple each hold about 22% of the weight of XLK, while Nvidia holds about 6%. According to Matthew Bartolini, head of SPDR Americas Research, after Friday's adjustment, Nvidia may account for about 21% of the weight of XLK, just like Microsoft, while Apple's weight will be only about 4.5%. For Nvidia, a 15% change means that the fund will increase its holding of the stock by more than $10 billion.

Bartolini said that if there were no limits, the weight of Microsoft, Nvidia, and Apple in the index would all exceed 20%. However, the diversification rules of the index restrict the total weight of stocks that account for at least 5% of the weight. Therefore, the weights of Microsoft and Nvidia may be around 21%, while Apple's weight will drop to about 4.5%.

It is worth noting that the rebalancing of XLK will be based on the adjusted closing price from last Friday and will take effect this weekend.

However, investors need to pay attention to the fact that once the rebalancing is confirmed, hedge funds and market arbitrageurs may scramble to buy or sell stocks of affected companies. This process is known as "front running." This may have an adverse effect on the stock price when ETFs prepare for adjustments. Earlier, researchers published a paper stating that front running causes price distortion, which can result in sacrificing the interests of ETF investors for profit.

In addition, James Seyffart, an ETF analyst at Bloomberg Intelligence, said he is eager to see if they will keep the rules unchanged in the next rebalancing in September. If Apple successfully surpasses Nvidia or Microsoft before the reference date (September 13) of the next rebalancing, there may be a mirror-style rebalancing in which Apple is bought for billions of dollars, while Nvidia and others are sold.

• When will it be included in the Dow?

Since Nvidia announced the stock split, it has been widely believed that this move may be to gain entry into the Dow Jones Industrial Average.

Unlike the S&P 500's "market value weighting", the Dow Jones uses a "price weighting" system, which means that the price movements of high-priced stocks have a greater impact on the index level than the price movements of low-priced stocks. This mechanism makes it difficult for high-priced stocks to be included in the Dow.

This rule has also resulted in the Dow's significant underperformance this year compared to the other two major indexes, with the S&P 500 up 15% and the Nasdaq up 19%. Keep in mind that Nvidia has contributed 40% to the overall increase of the Nasdaq this year.

Currently, some market observers believe that if the Dow Jones adjusts its weight before this Friday's Triple Witching Day on June 21, Nvidia has a high probability of being included.

• Triple witching day

This Friday is a big day, as the US stock market will welcome its second triple witching day of the year.

Recently, investors have flooded into call options related to Nvidia at an almost unprecedented rate. According to SpotGamma data, the open interest of Nvidia's call options has exceeded the open interest of those linked to the S&P 500 index.

According to SpotGamma data, about one-third of the open options linked to Nvidia will expire on Friday. It is worrisome that the market speculates that the upward momentum of Nvidia's stock price may weaken after the options expire on Friday, as the 'gamma squeeze' that drives the stock up will ease.

Gamma squeeze is a self-reinforcing behavior in which investors buy out-of-the-money call options, causing market makers to buy stocks to hedge the underlying assets and thus push up stock prices. If the hedging capital flows disappear after the expiration of the option this cycle, then the window for a significant pullback in the stock market will become very large.

In addition, Nvidia will hold its 2024 annual shareholders' meeting on June 26 Pacific Time (June 27 at midnight Beijing time), and investors are closely watching whether its stock price can reach a new high.

What's next for Nvidia?

At present, analysts still have great confidence in the future of technology stocks.

Hans Mosesmann, an analyst at Rosenblatt Securities, said that Nvidia will continue to rise, with a market capitalization of nearly $5 trillion in the coming year. He also significantly raised Nvidia's target price from $140 to $200, a potential increase of nearly 47.5%, which is currently the highest price on Wall Street.

Daniel Ives, an analyst at Wedbush Securities, believes that Nvidia, Apple and Microsoft will be the focus of the technology industry's $4 trillion market capitalization in the next year. As the Fourth Industrial Revolution advances, the demand for these chips from businesses and consumers is growing, and Nvidia's GPU chips are essentially the new gold or oil in the technology field.

Michael Lippert, vice president and portfolio manager of Baron Capital, pointed out: "They don't just sell chips, they also sell systems." He was referring to Nvidia's proprietary software and development ecosystem.

On Tuesday, Hans Mosesmann, an analyst at Rosenblatt Securities, also said that Nvidia will continue to rise, and its market value could reach nearly $5 trillion in the next year. Hans Mosesmann also raised Nvidia's target price from $140 to $200, which is equivalent to an additional 47.5% increase from Tuesday's closing price and is currently the highest price on Wall Street.

Nvidia is already one of the favorite stocks of sell-side analysts.According to data from Futu Bull, In the past three months, 40 analysts have rated Nvidia, with about 97.5% giving a buy rating and only 2.5% recommending a sell rating.

However, investors should beware that Nvidia's soaring stock price has already led to some company executives' shareholding reductions. According to statistics compiled by Washington Service, Nvidia executives and directors have sold about 770,000 shares of the company's stock, worth more than $700 million, since the beginning of the year, not including the impact of the stock split on June 10.

Editor/Somer