Investment Institute
Technology

Nasdaq-100 Index® - Beyond technology?

  • 29 March 2024 (5 min read)

The Nasdaq-100 Index® - holding a mirror to global megatrend evolution 

Capturing long-term growth momentum driven by megatrends is only one piece of the puzzle when it comes to thematic equity investing. Investors are increasingly aware of long-term, pervasive trends influencing our society such as the connected consumer, sustainable transport, digital health, augmented reality, and artificial intelligence (AI). These megatrends are themselves driven by formidable macroeconomic forces: evolving global demographics, acceleration of e-commerce, labor shortages, and the critical need to address climate change backed by supportive legislation persist among many others. Yet, as technology capabilities continue to grow across traditional sectors and increasingly penetrate new markets, it’s also important to identify how these distinct yet interrelated themes influence each other – and what this could mean for investors.

The evolving composition of the Nasdaq-100 Index® is a prime example of how disruptive technologies are no longer the sole preserve of pure tech firms and could be considered by those wishing to maximize their exposure to the potential offered by current and long-term growth trends across wider equity markets. Investors have already found compelling bottom-line reasons to invest in the Index, not least its favorable track record; historically, the Nasdaq-100 has delivered a superior return relative to comparable and well-known US and global indices.* This may provide a degree of conviction necessary for investors to reevaluate their goals in terms of desired levels of equity exposure in 2024, as global markets look primed to move away from the dominant, rate, and inflation-driven narratives of recent years.1

*Past performance is not a reliable indicator of future results.

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Figure 1 : Nasdaq-100 Index® Cumulative returns
Source: AXA IM, Factset as at 29/12/2023, cumulative price return for the indices shown, in USD. It is not possible to invest directly into an index, and fees and other expenses as well as currency fluctuations may reduce the return.

The Index, which is comprised of the largest non-financial companies listed on the Nasdaq Stock Exchange, is home to leading, innovative companies, which position themselves at the forefront of the long-term themes influencing our society. With many of these companies driven by technology, the Nasdaq-100 has historically been considered a “tech index.” However, this categorization is no longer reflective of the increasingly diverse – yet synergistic – potential opportunities held within its universe – at the end of 2023, those “pure” technology companies only made up around half of the Index

Figure 2: Nasdaq-100 Index® sectors breakdown (in %)
Source: AXA IM, Nasdaq as of 29/12/2023

Following last year’s well-publicized rise of the dominant FAANG companies’ valuations and associated market cap concentration, the Index was rebalanced in 2023 to reduce the resulting single-name concentration – thus increasing the potential for greater holdings diversity.2  This singular action is being complemented by the constant, growing need for companies within most industries to become inherently more technology-driven and adapt if they wish to stay competitive.3  This could suggest favorable potential of the Nasdaq-100 to remain a prominent source of innovative companies with R&D expenditure.4

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  • PGEgaHJlZj0iaHR0cHM6Ly9yZXNlYXJjaGZkaS5jb20vcmVzb3VyY2VzL2FydGljbGVzL2hvdy10ZWNobm9sb2d5LWlzLWNoYW5naW5nLXRoZS1sYW5kc2NhcGUtb2YtZWNvbm9taWMtZGV2ZWxvcG1lbnQiPlJlc2VhcmNoRkRJICg1LzI0LzIwMjMpPC9hPg==
  • PGEgaHJlZj0iaHR0cHM6Ly93d3cuc3RhdGlzdGEuY29tL3N0YXRpc3RpY3MvMjY1NjQ1L3Jhbmtpbmctb2YtdGhlLTIwLWNvbXBhbmllcy13aXRoLXRoZS1oaWdoZXN0LXNwZW5kaW5nLW9uLXJlc2VhcmNoLWFuZC1kZXZlbG9wbWVudCI+U3RhdGlzdGEgKDExLzIyLzIwMjMpPC9hPg==

Risk Warning

Investment involves risk including the loss of capital.

The information has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. This analysis and conclusions are the expression of an opinion, based on available data at a specific date. Due to the subjective aspect of these analyses, the effective evolution of the economic variables and values of the financial markets could be significantly different for the projections, forecast, anticipations and hypothesis which are communicated in this material.

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