Nasdaq 100 index to undergo special rejiggering because a few tech stocks have gotten too big

The fast rise of a few already-massive tech stocks this yr is inflicting Nasdaq to make uncommon changes to its in style development index.

The firm introduced July 7 that it’ll do a special rebalance of the Nasdaq 100 Index, which is able to take impact earlier than the market opens July 24.

The Nasdaq 100 index contains 100 of the biggest nonfinancial corporations that commerce on the alternate and is usually seen as a proxy for development stocks. The index has surged about 37% yr to date, properly above the S&P 500 and the Dow Jones Industrial Average.

Nasdaq mentioned a special rebalance can be utilized to “handle overconcentration within the index by redistributing the weights.”

While the index is already rebalanced on a quarterly foundation, Nasdaq tries to maintain the 5 largest stocks under a 40% mixed weighting in a single rebalance per yr designated because the annual adjustment, in accordance to the agency’s methodology. The 5 largest stocks seem to be over that threshold presently, in accordance to the holdings of the Invesco QQQ ETF, which tracks the index.

The QQQ’s holdings present how concentrated the index has change into. The three largest positions — Microsoft, Apple and Nvidia — account for greater than 30% of the fund mixed, as Nvidia’s inventory value has practically tripled this yr. The prime 10 holdings account for a mixed weighting of practically 59%.

This is the third special rebalance on file for the Nasdaq 100. The firm mentioned it should announce new weightings July 14.

“The special rebalance is a part of the Nasdaq-100 methodology and ensures that index-tracking funds keep compliance with fund diversification guidelines. Nasdaq-100 special rebalances have taken place beforehand in 2011 and 1998,” Cameron Lilja, international head of index product and operations at Nasdaq, mentioned in a assertion.

There are a number of index funds that monitor the Nasdaq 100, together with the QQQ, which has about $200 billion in belongings beneath administration.