Tesla (TSLA), Meta Platforms (META), and Broadcom (AVGO) saw their influence in the Nasdaq 100 Index (NDX) reduced in the annual rebalancing after a tech rally in 2024 swelled their valuations, according to Bloomberg. Meanwhile, Apple (AAPL), Nvidia (NVDA), Microsoft (MSFT), and Alphabet (GOOGL) gained larger weights in the index. These adjustments are done every year in order to prevent a few companies from dominating the benchmark.
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The Nasdaq 100 is primarily weighted by market cap but includes provisions to cap oversized influence. This latest adjustment likely followed a rule that allowed the fund to reset the top five companies’ combined weighting to just under 40%. Broadcom’s weight dropped from 6.3% to 4.4%, while Tesla’s fell from 4.9% to 3.9% and Meta’s slipped from 4.9% to 3.3%. These changes are due to the significant impact that artificial intelligence has had on the market in 2024, particularly with megacap tech gains.
In addition, this rebalancing affects over 200 exchange-traded products with around $540 billion in assets, such as the Invesco QQQ Trust (QQQ). Index tracking funds must now adjust their holdings to match the new weights and reduce their exposure to stocks like Tesla and Broadcom while boosting allocations to Apple and Nvidia. According to Bloomberg Intelligence‘s Athanasios Psarofagis, this shows just how much influence index providers have in affecting market dynamics as the number of passive investing products continues to rise.
Which Megacap Tech Stock Is the Best Buy?
Turning to Wall Street, out of the aforementioned stocks above, analysts think that NVDA stock has the most room to run. In fact, NVDA’s average price target of $177.08 per share implies almost 26.8% upside potential. In contrast, analysts expect the least from Tesla, as its $294.30 per share price target implies over 31% downside risk.
