Apple, Microsoft, and the rest of big tech have rapidly gotten too big for the Nasdaq 100 index. The index’s solution is a “special rebalance.”
John Authers for Bloomberg Opinion:
Megacap tech shares have powered six fantastic months for the stock market… So much so that the advance in the S&P 500, according to Bloomberg Intelligence, has been more concentrated among its largest stocks than in any six-month time frame since the turn of the millennium…
Six of the index’s largest members alone now comprise more than 50%. Tracking the Nasdaq-100 now unavoidably means placing a big bet on a handful of giant tech names. Such narrowness strips the index of diversification to a point where its providers had to take action.
Thus, a “special rebalance” was announced, to reduce the influence of six behemoths — Microsoft Corp., Apple Inc., Alphabet Inc., Nvidia Corp., Amazon.com Inc., and Tesla Inc. (Meta Platforms Inc., the final member of the “Magnificent Seven,” didn’t make the cut) — that have breached the upper limit, while boosting the presence of other members in the Nasdaq-100. The index provider said the rebalancing will take effect July 24 and seeks to “address overconcentration in the index by redistributing the weights.” The special rebalance will not result in the removal or addition of any securities. Changes are set to be revealed Friday…
The news prompted a flashback to 2011, when the Nasdaq trimmed Apple’s share to about 12% from 20%. The company, booming on the recent introduction of the iPad at the time, remained as the biggest stock in the index. A group including Microsoft, Oracle Corp., Intel Corp. and Cisco Systems Inc. saw their weighting increase the most.
MacDailyNews Take: As fund managers buy and sell, forced by their own rules and limits, after the rebalance, there may be a nice entry for our favorite fruit company. As always, we’ll have to see how the market digests the news on Friday, the fund managers’ subsequent forced selling (during which Apple’s huge buyback program remain in effect), and, of course, Apple’s fiscal Q323 results coming on August 3rd.
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