The ARK Innovation ETF, managed by Cathie Wood, has experienced a surge in performance following the announcement of a rebalancing in the constituencies’ weightings within the Nasdaq 100 index.
On July 7, Nasdaq revealed plans for a “Special Rebalance” of the Nasdaq 100 index, set to take place before the market opens on July 24. This decision aims to address an “overconcentration in the index” resulting from significant gains made by the “big seven” mega-cap tech stocks, including Apple (AAPL) and Microsoft (MSFT).
ARK Innovation (ticker: ARKK) primarily consists of smaller, yet-to-be-profitable tech stocks such as Coinbase Global (COIN), Roku (ROKU), and DraftKings (DKNG). Among these, only two stocks from the big seven mega-cap names find representation in ARK Innovation: Tesla (TSLA), which carries the most weight in the ETF, and Meta Platforms (META).
Over the course of this year, these large-cap tech stocks have experienced substantial growth due to increased investor interest in companies involved in artificial intelligence.
As a result of the Nasdaq 100 rebalancing, indexers will need to sell some of their holdings in the largest-cap stocks while bolstering their positions in smaller-cap names. On Tuesday, Apple’s shares dipped by 0.3%, Microsoft saw a 1% decrease, and Tesla declined by 0.2%. However, components of ARK Innovation traded positively, contributing to Wood’s portfolio growth. Zoom Video Communications (ZM) saw a 2.2% gain, Square (SQ) rose by 2.8%, and UiPath (PATH) increased by 3.5%.
According to Dow Jones Market Data, on Tuesday, ARK Innovation rose by 1.2% to $45.90, putting it on track for its highest closing price since August 2022. The ETF has been on an upward trajectory for the past three days, with a total gain of 6.2% during this period.