Tech giants become too big for Nasdaq

The big six – Apple, Microsoft, Amazon, Google parent Alphabet, Nvidia, and Tesla – have got too big for the Nasdaq 100. The six mega-cap giants’ huge share price gains mean they now account for over half the index, forcing it to undergo a “special rebalance” next week that will reduce their combined weighting to around 40 per cent.

While the Nasdaq change makes sense, concentration risk remains problematic. Indeed, it’s an issue even with the broader S&P 500 index.

The so-called magnificent seven – the aforementioned stocks, plus Meta – account for 28 per cent of the index, up from 20 per cent in January. Even investors opting for the Wilshire 5000 index can’t escape this problem, with the top five stocks accounting for a fifth of the index.

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All US indices, not just the tech-heavy Nasdaq, are now dominated by Big Tech, as the big stocks keep getting bigger.