Nasdaq 100 is a tech-heavy index with technology companies constituting nearly 37% of the gauge. The total market capitalization of the Nasdaq 100 is over $26 billion but the most striking feature of the index is that it is a highly concentrated index. Despite the fact that the Nasdaq 100 comprises hundreds of listed companies, almost 51.17% of the total market capitalization is concentrated in the top eight corporations – Microsoft, Apple, Amazon, Tesla, Google, Nvidia, Meta and Alphabet (Includes Class A and C shares of Google). Data as of March 31, 2023.
The top two companies by market capitalization in Nasdaq are Microsoft and Apple with a weightage of 12.57% and 12.34% respectively. This means, 25% of the Nasdaq 100 value is linked to the performance of these two blue-chip stocks.
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The Nasdaq 100 went into a tailspin in 2022, when almost all of the index stocks crashed, with some losing up to 80% of their value. 2023 began on a different note, as the tech-heavy index is now comfortably in the bull market territory after gaining 20% this year. Stock prices of NVIDIA and Meta, the parent company of Facebook have clocked over 80% YTD but nearly 25 stocks are still languishing in the negative zone.
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The popular FAANG stocks are the bellwether companies of the Nasdaq 100. FAANG stocks constitute Facebook (Meta), Amazon, Apple, Nvidia and Google (Alphabet ) and have remained investors’ favourite stock picks for many years now.
The last bull market in Nasdaq 100 was witnessed from April 2020 to February 2022, when the index delivered a total return of 134.2%, or a 46.2% annualised return. 2023 has begun on a good note for Nasdaq-listed stocks, however, investors must exercise caution in light of the bull market in technology companies. A decline in tech stocks is possible in the near future as a result of sticky inflation, rising core inflation, and rising yields.