A year later, the NASDAQ 100 Index has undergone a rebalancing due to a surge in the prices of major weighted stocks, reshuffling the technology giants.

According to data compiled by Bloomberg, in the NASDAQ 100 rebalancing, the weights of three major technology stocks—Tesla, Meta, and Broadcom—have all decreased. Tesla's weight dropped from 4.9% last Friday to 3.9%, Broadcom's from 6.3% to 4.4%, and Meta's from 4.9% to 3.3%.

At the same time, the weights of four other technology giants—Apple, NVIDIA, Microsoft, and Google's parent company Alphabet—in the NASDAQ 100 have all increased. Among them, Apple's weight rose from 9.2% to 9.8%, and NVIDIA's from 7.9% to 8.4%.

Among the seven stocks mentioned above with weight changes, excluding Broadcom, six belong to the well-known Meg Seven—the technology giants known as the "Seven Sisters," which include Microsoft, Apple, NVIDIA, Alphabet, Amazon, Meta, and Tesla.

According to market data from Dow Jones, as of the 11th of this month, the combined market cap of the "Seven Sisters" has surpassed 18 trillion dollars for the first time in history, with a combined weight exceeding 30% among S&P 500 constituents. The AI boom and expectations of interest rate cuts by the Federal Reserve are the main drivers behind the sharp increase in these technology stocks this year.

The weight of the NASDAQ 100 Index generally depends on the relative market cap of its constituent stocks. However, it is also influenced by several clauses; if a few constituent stocks become too large, the clauses restricting their influence will come into effect. For example, when the total weight of all constituent stocks exceeding 4.5% of the index reaches or exceeds 48%, an adjustment clause will be triggered.

In July of last year, the NASDAQ 100 triggered the above clause, leading to a rebalancing adjustment to avoid excessive concentration of the index in a few constituent stocks. This was also the third special adjustment in the history of the index, following those in December 1998 and May 2011.

Recently, after Broadcom's stock price soared and pushed its weight to break the 4.5% threshold, the Nasdaq 100 welcomed a rebalancing adjustment. Since the beginning of this year, the Nasdaq 100 has accumulated nearly 30% growth, with Tesla, Meta, and Broadcom reaching unprecedented levels among the constituent stocks. As of last Friday's close, Tesla's accumulated growth this year was nearly 70%, Meta was up over 60%, and Broadcom had risen nearly 98%.

Bloomberg reported that this adjustment in the Nasdaq 100 may stem from a rule that allows regulators to reset the combined weight of the five major constituent companies of the index to just below 40%, and adjust the weights of the other constituent stocks accordingly.

Analysis by Bloomberg Intelligence (BI) shows that there are over 200 exchange-traded products (ETPs) globally that track the NASDAQ 100 Index or its variations, with total assets of about 540 billion USD, including the ETF Invesco QQQ Trust Series 1 with trading code QQQ and the ETF Invesco NASDAQ 100 ETF with code QQQM.

With the rebalancing adjustment of the Nasdaq 100, these ETPs will also reduce the weight of the constituent stocks that are declining in the Nasdaq 100.

BI analyst Athanasios Psarofagis commented that this indicates the growing influence of index providers on market dynamics, emphasizing the importance of individual stocks being included in the index. Over the past few years, partly due to inflow into ETFs and passive investment tools, inclusion in the index has become even more significant.

Editor/lambor