The
logo
of
Nvidia
Corporation
is
seen
during
the
annual
Computex
computer
exhibition
in
Taipei,
Taiwan,
May
30,
2017.
Tyrone
Siu
|
Reuters
Nvidia‘s
blistering
rally
will
force
a
major
technology
exchange-traded
fund
to
acquire
more
than
$10
billion
worth
of
shares
of
the
chip
giant
while
cutting
dramatically
back
on
Apple.
The
index
that
the
Technology
Select
Sector
SPDR
Fund
(XLK)
follows
will
soon
rebalance,
based
on
an
adjusted
market
cap
value
from
Friday’s
close.
The
new
calculations
show
Microsoft
as
the
top
stock
in
the
index,
followed
by
Nvidia
and
then
Apple,
according
to
Matthew
Bartolini,
head
of
SPDR
Americas
Research.
All
three
stocks
would
have
a
weight
above
20%
in
the
index
if
there
were
no
caps
in
place.
But
diversification
rules
for
the
index
limit
how
big
the
cumulative
weight
of
stocks
with
at
least
a
5%
share
of
the
fund
can
be.
As
a
result,
Microsoft
and
Nvidia
will
likely
have
a
weight
of
around
21%,
while
Apple
will
fall
sharply
to
about
4.5%,
Bartolini
said.
That
is
a
change
from
the
prior
weightings,
which
saw
Nvidia’s
weight
be
kept
artificially
low
by
index
rules.
As
of
June
14,
Microsoft
and
Apple
were
both
at
about
22%
each
in
the
fund,
while
Nvidia
was
just
6%.
XLK
Shake-Up
|
Company |
Portfolio weight as of 6/14 |
Estimated weighting post-rebalance |
|---|---|---|
| Microsoft | 22% | 21% |
| Nvidia | 6% | 21% |
| Apple | 22% | 4.5% |
Source:
SPDR
The
race
to
finish
in
the
top
two
came
down
to
the
final
day.
As
of
Monday,
market
cap
data
from
FactSet
shows
that
all
three
companies
are
over
$3.2
trillion
and
within
$50
million
of
each
other,
though
that
data
does
differ
slightly
from
the
calculations
used
in
the
index.
The
XLK
has
about
$71
billion
in
assets
under
management,
so
a
15-percentage-point
change
in
the
fund
equates
to
more
than
$10
billion.
SPDR
does
not
comment
on
specific
trading
strategies
around
rebalances.
The
big
shift
in
the
XLK
is
an
extreme
example
of
how
even
passive
index
funds
can
diverge,
especially
when
focusing
on
narrow
slices
of
the
market.
“Understanding
how
they
might
be
weighted,
where
they’re
allocated,
what
the
rebalance
frequency
is,
is
really
important
because
it
can
create
differences
in
exposures
and
make
what’s
beneath
the
label
seem
different
from
fund
to
fund,”
Bartolini
said.
The
fund
follows
the
Technology
Select
Sector
Index
from
S&P
Dow
Jones
Indices,
which
uses
a
float-adjusted
calculation
to
determine
market
cap.
The
rebalance
officially
takes
effect
at
the
end
of
this
week.
The
free-float
adjustment
for
market
cap
accounts
for
large
holders
of
an
individual
stock
unlikely
to
be
trading
on
a
daily
basis.
For
example,
Warren
Buffett’s
Berkshire
Hathaway
owns
more
than
5%
of
Apple,
which
could
count
against
it
in
the
index,
Bartolini
said.
“Its
free-float
market
capitalization
is
reduced
because
you
have
so
many
controlled
interests
in
the
company,”
Bartolini
said.
The
rebalance
will
be
in
effect
for
one
quarter,
even
if
Apple
outperforms
Nvidia
significantly
ahead
of
the
official
date.
On
Monday,
shares
of
Apple
were
up
2%,
while
Nvidia
dipped
0.7%.
