NVIDIA Gains 20% Weighting and Billions of Dollars in Investor Demand in Big Tech Funds, While Apple is Downgraded

NVIDIAThe surge in shares will force big technology exchange-traded funds to make deep cuts to their holdings of the semiconductor giant, as they acquire more than $10 billion in shares. apple.

The index is Technology Select Sector SPDR Fund (XLK) The following stocks will be rebalanced immediately based on their market capitalizations adjusted from Friday’s closing prices: Microsoft According to Matthew Bartolini, head of SPDR Americas Research, the top stock on the index is Apple, followed by Nvidia and Apple.

Without a cap, the weightings of all three stocks in the index would exceed 20%. But the index’s diversification rules limit how large the cumulative weight of any stock that accounts for more than 5% of the fund can be.

As a result, Microsoft and Nvidia’s market share will likely fall to about 21%, while Apple’s share will plummet to about 4.5%, Bartolini said.

This is a change from the previous weighting, when index rules kept Nvidia’s weighting artificially low. As of June 14, Microsoft and Apple each accounted for about 22% of the fund, while Nvidia was just 6%.

The battle for the top two spots continued into the final day. As of Monday, all three companies had market capitalizations of more than $3.2 trillion, within $50 million of each other, according to FactSet market cap data, which differs slightly from the calculations used in the index.

XLK has about $71 billion in assets under management, so a 15 percentage point change in the fund would equate to more than $10 billion.SPDR would not comment on specific trading strategies for rebalancing.

XLK’s big move is an extreme example of how diversification can occur even with passive index funds, especially when they focus on a narrow slice of the market.

“Understanding how these assets are allocated, where they’re allocated, how often they’re rebalanced is really important because it can create differences in exposure and make what’s under the label look different from fund to fund,” Bartolini said.

The fund tracks the S&P Dow Jones Indices Technology Select Sector Index, which uses a float-adjusted calculation to determine market capitalization. The rebalancing officially goes into effect at the end of this week.

The float adjustment for market capitalization takes into account large holders of individual stocks that are unlikely to trade daily. For example, Warren Buffett’s Berkshire Hathaway owns more than 5% of Apple, which could count negatively in the index, Bartolini said.

“The company’s free float market capitalization is declining because it has so many controlling shares,” Bartolini said.

This rebalancing will be in effect for one quarter, even if Apple significantly outperforms Nvidia before the official announcement date.

Apple shares rose 1.8% on Monday, while Nvidia rose 0.2%.