Nasdaq 100

A stock market index made up of the 100 largest non-financial companies listed on the Nasdaq stock exchange.

The Nasdaq 100 is a stock market index tracking 100 of the largest, most active non-financial companies listed on the Nasdaq Stock Market. It is a modified capitalization-weighted index, meaning that while larger companies have a greater impact on the index's value, weight limits are applied to prevent a handful of mega-cap stocks from completely dominating the index. The index is reconstituted annually each December, with additional quarterly rebalancing to maintain these weighting constraints. Investors monitor the Nasdaq 100 as a primary barometer for large-cap growth stocks, particularly in the technology, consumer services, and biotechnology sectors. Because the index completely excludes financial companies like commercial banks and investment firms, its performance often diverges significantly from broader market benchmarks like the S&P 500 or the Dow Jones Industrial Average. When the Nasdaq 100 rises, it generally indicates strong investor appetite for high-growth, high-multiple companies. Conversely, because many of its constituent companies rely on future cash flows to justify their valuations, the index is highly sensitive to interest rate changes. Rising interest rates often lead to underperformance in the Nasdaq 100 as investors discount those future earnings more aggressively.

Suppose the total market capitalization of the 100 non-financial companies in the index is $20 trillion. If Company A has a market capitalization of $2 trillion, its raw weight in the index would be 10% ($2 trillion / $20 trillion). However, if the index's modified methodology caps any single stock's weight at 8% during a quarterly rebalancing, Company A's weight is adjusted down to 8%, and the remaining 2% is redistributed among smaller components.