2024.06.17 08:05
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Giant ETF rebalancing, will NVIDIA welcome a $10 billion buy-in?

If NVIDIA replaces Apple as the second largest holding in SPDR (XLK), this could mean that NVIDIA may receive billions of dollars in buying funds in the short term

A $70 billion giant ETF will rebalance this week, will NVIDIA replace Apple as its second largest holding?

According to media reports last Friday, the largest tech stock ETF SPDR Fund (XLK) will rebalance quarterly this week, adjusting stock weightings. Currently, Apple and Microsoft account for about 22% of the fund's weight each, while NVIDIA's weight in the fund is less than 6%.

As of last Friday's close, the market value difference between Microsoft, Apple, and NVIDIA is all within $100 billion. According to Google Finance data, Apple's market value is $3.26 trillion, while NVIDIA's market value is $3.24 trillion. XLK's holdings are determined based on market value adjusted by outstanding shares, so traders may need to wait for official notifications from S&P and Dow Jones to determine the final order.

UBS predicted in a previous report:

If NVIDIA rises to second place and Apple falls to third, NVIDIA's weight in the fund will soar to 21%, while Apple's weight will drop to only 4.5%.

The 15% weight fluctuation of NVIDIA means the fund needs to buy a large amount of NVIDIA stocks, possibly up to $10 billion, and all must be purchased on June 21st or very close to that rebalancing date, this large-scale trading could potentially boost NVIDIA's stock price in the short term.

In comparison, NVIDIA's total trading volume last Friday was about $50 billion.

Analysis points out that such a major shift in index funds is not common but not unprecedented. Matthew Bartolini, head of SPDR Americas Research, stated:

There have been rebalances around changes in industry classifications before, such as Amazon being moved to the non-essential consumer goods category. If we are forced to make a fairly significant trade, I believe we are capable of handling it