Why is the NASDAQ heavily weighted towards technology stocks?
The NASDAQ’s upstart image and all-electronic trading platform have attracted more technology-based companies. Many of these companies didn’t qualify to list on the NYSE when they originally went public.
Sept. 11 2014, Updated 9:01 a.m. ET
Why is the NASDAQ tech-heavy?
Companies have a choice of listing on the New York Stock Exchange (or NYSE) or the NASDAQ when listing their stock in the U.S. This means companies can also choose to list on both exchanges. While the NYSE also has a physical trading floor, as it’s operated without the assistance of computers for the bulk of its existence, the NASDAQ has no physical trading floor—it’s 100% electronic.
The NASDAQ’s upstart image and all-electronic trading platform have attracted more technology-based companies. Many of these companies didn’t qualify to list on the NYSE when they originally went public.
Comparing NASDAQ ETFs and their holdings
The chart above compares the sectoral allocations of the top large-cap growth equity ETFs trading on the NASDAQ—the PowerShares QQQ Trust, Series 1 ETF (QQQ), the iShares Russell 1000 Growth Index Fund (IWF), and the Vanguard Growth Index Fund (VUG). The larger proportion of funds allocated to the technology sector for all three of these ETFs substantiates the technology bias of the NASDAQ exchange. Consequently, these ETFs heavily invest in technology companies like Apple (AAPL) and Google (GOOG).
The PowerShares QQQ Trust, Series 1 ETF (QQQ), tracks 100 of the largest domestic and international non-financial companies listed on the NASDAQ stock exchange. With the exclusion of financial firms, the fund heavily invests in companies in the technology sector. The fund has invested about 13.54% of its funds in Apple, followed by Microsoft (8.14%), Google (7.80%), and Intel (3.79%). These companies are all popularly known as tech giants. Similarly, the top stocks of the iShares Russell 1000 Growth Index Fund (IWF) are Apple (5.94%) and Microsoft (2.33%).