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Key Takeaways
The Technology Select Sector SPDR Fund (XLK) will likely be forced to buy billions of dollars worth of Nvidia stock—and dump a similar amount of Apple—when it rebalances this week.
Nvidia’s weight in the ETF is expected to nearly quadruple after its float-adjusted market cap exceeded Apple’s at the end of last week.
Rules governing fund diversification have forced XLK to be massively underweight Nvidia as the company’s value has more than doubled this year.
One of America’s largest technology-focused exchange-traded funds is expected to get a massive makeover this week.
The Technology Select Sector SPDR Fund (XLK) will likely be forced to buy billions of dollars worth of Nvidia (NVDA) stock, while drastically cutting back its Apple (AAPL) exposure, when it undergoes quarterly rebalancing on Friday, a byproduct of both the chip giant’s meteoric rise this year and arcane fund diversification rules.
“The Massive Rebalance is Happening (I’m pretty sure),” said James Seyffart, an ETF Research Analyst for Bloomberg Intelligence in an X post on Friday. “Back of napkin math means $XLK will have to sell about $12.6 billion worth of $AAPL and buy about $10.9 billion worth of $NVDA at current prices. This trade will occur on June 21. Need confirmation from S&P/SPDR though.”
Matthew Bartolini, head of SPDR America’s Research at State Street, which manages the XLK, concurred with Seyffart’s math in comments to CNBC. S&P Global declined to comment on potential index changes.
What’s Going On With The XLK?
XLK tracks the Technology Select Sector Index, which is composed of the stocks of the S&P 500 companies operating in the Information Technology sector. There are 65 in total, including America’s three most valuable companies: Apple, Microsoft (MSFT), and Nvidia.
The fund is theoretically market-capitalization weighted, meaning the higher a company’s market value the more influence it has over the fund’s value and share price. But the reality is more complex. Due to…
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