If investors judge that MAG7 is too concentrated, but do not want exposure to a long tail of smaller names in the Nasdaq 100, the new iShares Nasdaq Top 30 Stocks ETF (QTOP) could be a happy medium – owning the largest 30 stocks in the Nasdaq 100 index.
The majority of these are technology names, though they do also include retailer Costco; mobile operator T-Mobile; chemicals group Linde; food and drink maker PepsiCo; medical devices group Intuitive Surgical, biotechs Amgen and Gilead; online travel agency Booking Holdings; coffee shop Starbucks, media group Comcast and industrial conglomerate Honeywell. These add some diversification away from tech and AI.
The top 30 make up over 70% of the Nasdaq 100 index weights so this product is likely to have a strong correlation with the popular tech index.
Conversely, if investors judge that the next Nvidia could be hiding somewhere in the next 70 stocks, they can also opt for iShares Nasdaq 100 ex Top 30 ETF (QNXT).
Its largest 10 holdings are still mainly in information technology, and include five chipmakers: Analog Devices, Lam Research, Micro Technology, Marvell Technology, and KLA Crop. The other two IT holdings are app specialist AppLovin and cybersecurity group Crowdstrike.
However, across all 70 stocks, technology is less than half of the sector exposure: software and services is 22.53% and semiconductors 19.9%.
The rest is in consumer discretionary, pharma, food and beverages, commercial services, utilities, consumer services, media and entertainment, capital goods, healthcare and transportation.
This shows that the Nasdaq 100 is not synonymous with technology. Indeed, companies in any industry that satisfy Nasdaq’s listing requirements can choose to list their shares on the Nasdaq.
The expense ratio of 0.20% for both QTOP and QNXT is the same as on Invesco’s QQQ. If investors feel confident enough to make a wager on larger or smaller Nasdaq 100 names, it will not cost them any more than owning the whole index.