Big tech's dominance hits breakpoint for Nasdaq 100

economictimes.indiatimes.com:

tech companies have become too large even for the stock index tracking America's biggest tech companies. Now the benchmark's overseer is taking action to pare back their influence. The seemingly unstoppable growth of megacaps like Apple and Microsoft mean they have breached an upper limit imposed on stocks in the Nasdaq 100.

As a result, Nasdaq has announced a «special rebalance» — the first ever of its kind — will be carried out to redistribute the weight of the index's members. The index provider says the July 24 adjustment will «address overconcentration in the index by redistributing the weights,» according to a statement from the firm on Friday, with more details due later this week. Nasdaq's extraordinary action is a result of the relentless rally that has accounted for almost all the broader market's gains in 2023.

Fueled by optimism over artificial intelligence, the supercharged performance has sparked a heated debate on Wall Street about whether this top-heavy advance can last. It's «a good thing as it reduces the concentration risk from those players,» said Todd Sohn, managing director of ETF and technical strategy at Strategas Securities. «On the other hand, it increases the burden for the rest of the index — what I like to call 'the bench' — to continue to improve and strengthen.» While details on the action are sparse, a paper on the Nasdaq website says special rebalancings can be called in certain circumstances when the portion represented by the index's biggest members exceeds a preset threshold.