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 tech fund to acquire more than $10 billion worth of shares of the chip giant while dumping 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 not 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 be down 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 at 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 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.