Nvidia eclipsing Apple threatens radical shakeup of US$67 billion ETF

One of the world’s biggest tech ETFs looks poised for a shake-up after Nvidia Corp. catapulted past Apple Inc. in size.

Thanks to diversification rules, the US$67 billion Technology Select Sector SPDR Fund (ticker XLK) has held way fewer Nvidia shares for months now while the AI giant continues to soar. Currently, the chipmaker makes up roughly six per cent of the fund’s assets, compared with 21 per cent for the S&P 500 Information Technology Index — spurring XLK to underperform big time this year. 

Now that Nvidia has raced past Apple in value, its ownership in XLK could undergo a drastic elevation when the ETF carries out a quarterly rebalance near the end of this month, according to Bloomberg Intelligence. 

The ETF will reflect the full heft of the semiconductor pioneer’s capitalization — if Nvidia keeps its edge over Apple on Friday, the day when each XLK member’s preliminary representation is determined. In the process, Apple’s weight, currently at 21 per cent of the fund, could drop to as little as 4.5 per cent, thanks again to this diversification rule.