Just one year after the NASDAQ 100 Index adjusted the weights of heavily weighted tech giants in July last year, the index may face a new round of weight adjustments.
According to Bloomberg, as of Monday's close, eight companies in the NASDAQ 100 Index (including NVIDIA, Amazon, Tesla, etc.) have individual stock weights exceeding 4.5%, with a total weight approaching 52%, making the NASDAQ index overly &#34;top-heavy.&#34; According to NASDAQ rules, the total weight may need to be reduced to 40%.
The main reason for this situation is that tech giants represented by Apple and Microsoft have seen their stock prices surge significantly over the past year, with an average increase of 79%, which is four times the average increase of other constituent stocks in the index, while the active artificial intelligence concept has been the main driver behind the rise in these companies' stock prices.
The NASDAQ 100 Index has rules to limit the weight of individual constituent stocks, one of which triggers an adjustment mechanism when the total of all individual stocks exceeding 4.5% reaches or exceeds 48%. In July last year, the index had previously reduced the weights of seven companies for this reason. Recently, due to a surge in Broadcom's stock price, its weight has surpassed the 4.5% threshold, triggering this mechanism again.
A NASDAQ spokesperson stated that this weight adjustment will coincide with the annual routine rebalancing scheduled for Friday. This means that index-tracking funds such as Invesco QQQ Trust must adjust their holdings. New members set to join, including MicroStrategy, Palantir Technologies, and Axon Enterprise, as well as those being replaced, such as Illumina, Super Micro Computer, and Moderna, will all be affected.
Todd Sohn, an ETF strategist at Strategas Securities, stated:
<blockquote>
&#34;The market seems intent on breaking index rules that have existed for decades and forcing index providers to rethink how to handle a world with trillions of dollars in market capitalization. After a brief summer adjustment, the dominance of large-cap tech giants has re-emerged.&#34;
</blockquote>
The continued dominance of tech giants in the market presents challenges for index providers, forcing some companies to reconsider rules to comply with long-standing diversification rules designed to protect investors from concentrated portfolios.
It is worth noting that earlier this year, FTSE Russell and S&amp;P Dow Jones Indices both adjusted their related index rules to limit the influence of large-cap stocks.
Analysts believe that NASDAQ's decision to transform the once-special rebalancing into a regular rebalancing further highlights the role of human factors in passive investing and creates opportunities for professional hedge funds to profit

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As of Monday's close, eight companies in the NASDAQ 100 Index had individual stock weights exceeding 4.5%, with a total weight approaching 52%, making the index overly "top-heavy." According to relevant rules, the total weight may need to be reduced to 40%. A NASDAQ spokesperson stated that this weight adjustment will occur simultaneously with the annual routine rebalancing taking place on Friday

- The Nasdaq 100 Index may undergo a new weight adjustment due to eight companies, including Nvidia and Amazon, exceeding a 4.5% weight threshold, collectively nearing 52%.  
- This situation arises from significant stock price increases among tech giants like Apple and Microsoft, driven by active AI concepts, with their average gains reaching 79%.  
- The upcoming adjustment will coincide with the annual rebalancing, affecting index-tracking funds and prompting a reevaluation of diversification rules by index providers in response to market concentration challenges.

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The giants' surge is too rapid; will the NASDAQ be forced to adjust its weights again after a year?