Suzanne McGee and Lisa Pauline Matakal
(Reuters) – Some of the world's largest technology funds are set to boost their investments in Nvidia, whose soaring share price has made it the world's most valuable company.
The $72.34 billion Technology Select Sector SPDR fund, managed by State Street Global Advisors, plans to buy about $10 billion worth of Nvidia shares while reducing its investment in Apple, confirmed Matthew Bartolini, head of SPDR Americas research at State Street.
The change is being made to align the holdings with upcoming changes to the S&P Dow Jones Technology Select Sector Index, which the fund tracks. Bartolini said the change will result in Microsoft and Nvidia sharing the top spot in both the fund and the index, with Apple coming in second.
On Tuesday, chipmaker Nvidia's market capitalization hit $3.33 trillion, surpassing Microsoft to become the world's most valuable company.
Previously, the tech ETF had 22.5% of its assets invested in Microsoft, 21% in Apple and just 6% in Nvidia, says Jay Woods, chief global strategist at Freedom Capital Markets. The fund has underperformed its benchmark as Nvidia shares have risen 173% this year.
By the close of trading this Friday, when the index rebalances based on last Friday's market caps, Microsoft will maintain its dominance in the SPDR ETF's portfolio with a 21% weighting. Nvidia will also have a 21% weighting, while Apple will plummet to 4.5%.
Nvidia shares recently rose 3.7% to $135.85, while Apple shares were down 1.5% to $213.33.
“The fact that Nvidia shares are up and Apple shares are down today could reflect that ETF rebalancing is already underway,” said Steve Sosnick, chief strategist at Interactive Brokers.
Index and portfolio construction rules allow the ETF to hold only two of the three biggest technology companies in maximum weightings (21%); other large holdings cannot exceed 4.5%. The rules, enacted in 1998 when the index was launched, limit total exposure to all stocks with weightings above 5% in the broader S&P 500 index to 50% of the portfolio.
Bartolini noted that it is “unprecedented” to have three major tech companies competing for the top two positions in an ETF portfolio.
(Reporting by Suzanne McGehee; Additional reporting by Lisa Pauline Matakal; Editing by Sharon Singleton)
