Nvidia’s stock was showing a slight increase early Tuesday, poised to gain from a reweighting in a prominent technology fund, potentially at the expense of Apple. Nvidia shares were up 0.1% at $131.13 in premarket trading, recovering slightly after closing down 0.7% on Monday.
A key factor in Nvidia’s current rally is its recent 10-for-1 stock split, which has positively influenced its market perception and performance. This split, coupled with the upcoming rebalancing of the $70 billion Technology Select Sector SPDR ETF (XLK), positions Nvidia for a significant boost. The ETF, which tracks the S&P Technology Select Sector Index, is set to adjust its holdings on June 21.
State Street Global Advisors has confirmed that Microsoft will maintain the top weighting in the S&P Technology Select Sector Index. However, Nvidia is expected to leapfrog Apple to claim the second position. This shift is likely to increase Nvidia’s allocation in the ETF from around 6% to over 20%. This reallocation will necessitate the ETF purchasing approximately $10 billion worth of Nvidia shares while selling more than $11 billion of Apple shares. Despite these substantial figures, they are relatively minor compared to the overall market valuations of Nvidia and Apple, both of which exceed $3 trillion.
This reweighting could be particularly impactful for Nvidia, which has already seen its shares soar by 164% this year through Monday’s close. This impressive gain stands in stark contrast to the broader market, with the S&P 500 index up 15% and the Nasdaq Composite Index up 19% over the same period.
Other chip makers showed mixed premarket activity: Advanced Micro Devices (AMD) was down 0.4%, and Intel was down 0.3%.
The forthcoming ETF rebalancing underscores Nvidia’s strengthening position in the technology sector, driven by its robust performance and strategic moves like the stock split. As Nvidia continues to capitalize on its market position, the increased ETF allocation could further bolster its stock, maintaining its upward trajectory. Meanwhile, Apple’s reduced weighting in the ETF might slightly temper its stock performance, reflecting the dynamic shifts within the technology investment landscape.