Hey Traders,
The Nasdaq 100 index is set to adjust the weighting of its 100 components, with the “magnificent seven” stocks Microsoft (MSFT), Apple, Nvidia (NVDA), Tesla (TSLA), Google parent Alphabet (GOOGL), Meta Platforms (META) and Amazon.com (AMZN) currently accounting for more than half the index’s weight.
The Magnificent Seven stocks largely fell Monday and generally edged higher Tuesday.
The Nasdaq 100 special rebalance will take place before the market opens on Monday, July 24. The Nasdaq has only conducted a special rebalance twice in its history: in December 1998 and May 2011.
The weighting changes will be announced on Friday, July 14. No stocks will be added or removed.
The seven-largest companies in the Nasdaq 100 account for 55% of the index. This combined weighting will be reduced. It’s also likely that there may be notable relative weighting shifts within these seven giants.
The current weights show that market capitalization is the dominant factor, but it’s not the only one.
Microsoft stock has the largest weight, at 12.9%, as of July 7. Apple stock has a 12.5% weight, despite having a $2.999 trillion market cap vs. Microsoft’s $2.51 trillion.
Google stock has a 7.4% weighting, with the GOOGL and GOOG share classes combined.
Nvidia stock has vaulted to a 7% Nasdaq 100 weighting, thanks to its $1.05 trillion market cap. That’s a slightly larger weight than Amazon stock (6.9%), even though the latter has a significantly higher valuation at $1.33 trillion.
Tesla stock and Meta Platforms round out the top-seven members, with weights of 4.5% and 4.3%, respectively.
Just for reference, for the entire Nasdaq composite, Apple stock had an 11.4% weighting as of July 7 while Microsoft was at 9.5%. GOOGL stock is at 5.8% while Amazon and Nvidia are at 5.1% and 4%, respectively. TSLA stock has 3.3% share and META stock is at 2.8%.
How Much Will the Nasdaq 100 Mega Caps Be Cut?
Based on Nasdaq 100 methodology, the combined weight of the five companies with the largest market caps will be set to 38.5%. From the current weightings of 46.7%.
Meanwhile, no component outside the top-five market cap companies can have a Nasdaq 100 exceeding the lesser of 4.4% or the weight of the stock with the fifth-largest market valuation. That points to at least a slight decline in TSLA stock’s weight.
The official reweightings should be released on Friday, perhaps after the close. That will also include stocks that will see increased weightings.
Which Stocks Will See Higher Nasdaq Weightings?
Starbucks (SBUX), Mondelez International (MDLZ), Booking Holdings (BKNG), Gilead Sciences (GILD), Intuitive Surgical (ISRG), Analog Devices (ADI) and Automatic Data Processing (ADP) will be bigger winners from the special rebalance.
I think with all the gamma building into next Friday’s OpEx … a week from now could be good timing for paired trades.
And Mark Sebastian’s Nitro Trader is perfect for those paired trades!
Live And Trade With Passion My Friends,
Bill Griffo