XLK Rebalancing to Reverse Apple, Nvidia Stock Positions

XLK Rebalancing to Reverse Apple, Nvidia Stock Positions

The $72 billion tech sector fund is set for a major allocation shift Friday.

kent
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Research Lead
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Reviewed by: etf.com Staff
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Edited by: James Rubin

The Technology Select Sector SPDR Fund (XLK), the second-largest technology sector exchange-traded fund by assets under management, will dramatically shift the weighting for two of its top holdings on Friday.  

XLK, which has $72 billion in assets under management, will increase its allocation in Nvidia from roughly 5% to more than 20% and drop its allocation of Apple from about 21% to 5%, reversing the stocks’ positions in the ETF with Nvidia becoming the second largest holding. 

“XLK will be a forced seller of ~$11 billion worth of $AAPL and a forced buyer of almost $10 billion worth of $NVDA in a rebalance... assuming Nvidia remains larger than Apple at market close on Friday,” Bloomberg research analyst James Seyffart wrote in a post on the social media platform X. 

Microsoft will retain the top weighting in the index, State Street Global Advisors, the fund’s issuer, confirmed. XLK’s rebalancing follows Nvidia's (NVDA) recent market capitalization surpassing Apple's (AAPL). The tech sector fund passively tracks the performance of its benchmark index, the Technology Select Sector Index, which holds a basket of technology companies.  

The weighting of each company in XLK must reflect their weighting in the index. So XLK must now purchase Nvidia Shares and sell Apple on Friday to mimic their new weightings in the index that the fund tracks. 

NVDA vs AAPL: Market Impact of XLK Rebalancing

The rebalancing of the XLK ETF this Friday is likely to cause upward pressure on Nvidia's stock price and downward pressure on Apple's price, based on similar reallocations. However, the exact impact is difficult to predict and will depend on various market factors. 

The impact on stock prices depends on how the broader market reacts to the rebalancing. Investors anticipating the rebalancing may have already adjusted their holdings, meaning the price movements might be smaller than expected.  

The price movements might be more prominent in the short term, around the time of the rebalancing. In the long run, the stock prices will likely be driven more by the companies' individual performance and overall market conditions. 

Kent Thune is Research Lead for etf.com, focusing on educational content, thought leadership, content management and search engine optimization. Before joining etf.com, he wrote for numerous investment websites, including Seeking Alpha and Kiplinger. 

 

Kent holds a Master of Business Administration (MBA) degree and is a practicing Certified Financial Planner (CFP®) with 25 years of experience managing investments, guiding clients through some of the worst economic and market environments in U.S. history. He has also served as an adjunct professor, teaching classes for The College of Charleston and Trident Technical College on the topics of retirement planning, business finance, and entrepreneurship. 

 

Kent founded a registered investment advisory firm in 2006 and is based in Hilton Head Island, SC, where he lives with his wife and two sons. Outside of work, Kent enjoys spending time with his family, playing guitar, and working on his philosophy book, which he plans to publish in the coming year.