How Nvidia’s monster rally broke your tech ETF

Published On Oct 1, 2024, 6:00 AM

Investors in the SPDR Technology Select Sector ETF are facing shifts in their asset allocations due to the dominance of Apple, Microsoft, and Nvidia in the market. Despite similar market capitalizations, Nvidia's previous weight in the SPDR fund was much lower than Apple’s, which has led to underperformance issues for the ETF. This prompted S&P Dow Jones Indices to adjust its rules to limit concentration after realizing the significant impact of major tech stocks on index performance. Most recently, the weights of these stocks were recalibrated to comply with regulations, which could affect future rebalancing decisions and investor returns.

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Stock Forecasts

AAPLView AAPL chart on TradingView

Positive

The adjustment in the weights of major tech stocks in the SPDR fund aligns it better with market capitalizations, reducing the risk of severe reallocation in future rebalances. Apple may be expected to perform well as the largest U.S. company, potentially improving ETF performance overall.

NVDAView NVDA chart on TradingView

Positive

Despite Nvidia's slight increase in weight within the SPDR fund, its recent performance has not matched that of Apple, leading investors to reassess its potential. However, Nvidia's strong growth trajectory in AI and gaming could bounce back as market dynamics evolve.

XLKView XLK chart on TradingView

Positive

The SPDR Technology Select Sector ETF may face ongoing pressures as it adjusts to major tech concentrations, but its diversified holdings could still provide stability in volatile markets. With big tech stocks dominating, the overall sector can provide opportunities for investors focusing on long-term gains.

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