Nvidia’s rapid rise in the market has forced the Technology Select Sector SPDR Fund (XLK) to acquire over $10 billion worth of shares of the chip giant while selling off shares in Apple. The fund follows an index that will soon rebalance based on market cap values, with Microsoft now taking the top spot, followed by Nvidia and then Apple. Diversification rules in the index will limit Microsoft and Nvidia to around a 21% weighting, while Apple’s share will drop to approximately 4.5%.
The previous weightings in the index saw Nvidia’s share held artificially low by index rules, with Microsoft and Apple both at 22% each and Nvidia at 6%. The race to finish in the top two positions came down to the wire, with all three companies now having market caps over $3.2 trillion and within $50 million of each other. The XLK, with $71 billion in assets under management, will undergo a significant change with the rebalance, equating to over $10 billion in assets being moved around.
The Technology Select Sector SPDR Fund follows the Technology Select Sector Index, which uses a float-adjusted calculation to determine market cap. The official rebalance will take effect at the end of the week, with Microsoft, Nvidia, and Apple seeing significant shifts in their weightings. While SPDR does not comment on specific trading strategies for rebalances, the impact of the changes in the index will be substantial, with Nvidia’s rise in the market and market cap leading to a major shift in the fund’s holdings.
Investors in the XLK fund will see Microsoft take the top spot in terms of portfolio weighting, with Nvidia coming in second, and Apple’s weighting dropping significantly. This change reflects the market dynamics and the strong performance of Nvidia in recent times. The rebalancing of the index will have a significant impact on the fund’s holdings and could lead to increased volatility as assets are shifted around to accommodate the new weightings.
