Nasdaq 100 Index

Nasdaq 100 Index: Overview, Structure, and How to Invest

Key takeaways
* The Nasdaq-100 Index tracks the 100 largest nonfinancial companies listed on the Nasdaq exchange.
* Components include common stocks, ordinary shares, American depositary receipts (ADRs) and tracking stocks, provided they meet listing and liquidity criteria.
* The index uses a modified market-capitalization method that limits the influence of the largest companies and is rebalanced regularly.
* Investors can access the index through ETFs, mutual funds, futures and options, and other products.

What the Nasdaq-100 is
The Nasdaq-100 is a market-cap-weighted index (using a modified approach) that represents the largest 100 nonfinancial companies trading on Nasdaq exchanges. It excludes financial firms and emphasizes sectors such as technology, consumer discretionary and healthcare. Because it focuses on large, highly traded companies, the Nasdaq-100 is widely used as a benchmark for growth-oriented and tech-heavy exposure.

Eligibility and construction
* Listing and security types: Eligible securities must trade exclusively on a Nasdaq exchange and can include common stock, ordinary shares, ADRs and tracking stocks.
* Nonfinancial requirement: Financial-sector companies are excluded.
* Minimum trading history and liquidity: Securities must have traded for at least three months and meet a minimum average daily trading value threshold (typically $5 million over the prior three months).
* No strict market-cap floor: There is no fixed minimum market capitalization for inclusion.
* Weighting methodology: The index uses a modified market-cap approach that adjusts individual weights to prevent overconcentration among the largest companies. Nasdaq reviews the index composition quarterly and applies rebalancing rules when distribution limits are breached.

Sector composition
The Nasdaq-100 is concentrated in a few sectors, with technology typically the largest. Representative sector weights (approximate) include:
* Technology: ~62%
* Consumer Discretionary: ~19%
* Healthcare: ~5%
* Industrials: ~4%
* Telecommunications: ~4%
* Consumer Staples: ~3%
* Basic Materials: ~1.5%
* Utilities: ~1.5%
* Energy: ~0.5%

Top holdings (representative weights)
Large-cap tech and consumer companies make up a significant portion of the index. Example top weights include:
* Nvidia — ~9.2%
* Microsoft — ~8.8%
* Apple — ~7.3%
* Amazon — ~5.5%
* Broadcom — ~5.1%
* Meta Platforms — ~3.8%
* Netflix — ~3.3%
* Tesla — ~2.8%
* Costco Wholesale — ~2.6%
* Alphabet (Class A) — ~2.4%

Special rebalancing and concentration limits
Nasdaq enforces rules to limit the index’s concentration: if stocks above a certain individual weight (e.g., >4.5%) collectively exceed a threshold (e.g., 48% of the index), a special rebalance can be triggered to reduce overconcentration. Special rebalances have been rare (including prior events in 1998, 2011 and a notable adjustment in July 2023) and are intended to preserve diversification. Such rebalances adjust component weights and can shift relative exposures across names and sectors.

How to invest in the Nasdaq-100
You can gain exposure to the Nasdaq-100 without buying each constituent through:
* Exchange-traded funds (ETFs) that track the index (most accessible for individual investors).
* Mutual funds that replicate or approximate the index.
* Futures and options based on the index (used by more advanced traders and institutions).
* Structured products or annuities that reference index performance.

Choosing the right vehicle depends on costs, tax considerations, trading flexibility and your risk tolerance.

Common questions
What companies make the Nasdaq-100?
The index includes the 100 largest nonfinancial companies trading on Nasdaq, spanning technology, consumer goods, healthcare and other sectors.

What does “Nasdaq-100” mean?
It denotes the 100 largest nonfinancial Nasdaq-listed companies as measured by a modified market-capitalization methodology.

Is the Nasdaq-100 a buy or sell?
That depends on your investment goals, time horizon and risk tolerance. The index is growth- and tech-heavy, so it may suit investors seeking higher-growth exposure but who can accept greater sector concentration and volatility. Consider consulting a financial advisor.

Bottom line
The Nasdaq-100 offers concentrated exposure to large, nonfinancial Nasdaq-listed companies, with a strong bias toward technology and consumer-discretionary names. Its modified market-cap weighting and periodic rebalancing are designed to reduce extreme concentration, while ETFs and other products provide easy access for investors seeking this style of market exposure.