Annual Changes to the Nasdaq-100 Index: A Deep Dive

The Nasdaq-100 Index (NDX) is a widely followed benchmark for the performance of the largest non-financial companies listed on the Nasdaq Stock Market. The index is reconstituted annually, with changes taking effect in December. This year's reconstitution, announced on December 13, 2024, brings significant shifts to the index, with three companies being added and three removed. This article explores the potential impacts of these changes on the market capitalization and liquidity of the Nasdaq-100 Index.



The addition of Palantir Technologies (PLTR), Axon Enterprise (AXON), and MicroStrategy (MSTR) to the Nasdaq-100 Index is expected to have a substantial impact on the index's market capitalization and liquidity. According to ORTEX data, Palantir's inclusion could drive an estimated buying impact of about $6.96 billion worth of shares, while Axon's and MicroStrategy's inclusion might prompt $2.19 billion and $3.34 billion in buying, respectively. This influx of capital will increase the Nasdaq-100's overall market capitalization and potentially boost liquidity, as these companies' shares are likely to experience higher trading volumes.



On the other hand, the removal of Illumina, Inc. (ILMN), Super Micro Computer, Inc. (SMCI), and Moderna, Inc. (MRNA) from the Nasdaq-100 Index could have significant impacts on their market capitalization and liquidity. According to ORTEX data, Illumina's removal may lead to an estimated $1.06 billion in net selling, or around 7.14 million shares, which is approximately 3.76 times its average daily volume (ADV), indicating a more significant liquidity event on the downside. Super Micro Computer's removal could result in roughly $1.07 billion in selling, equating to about 26.35 million shares, which is only about 0.39 times its ADV, potentially easing liquidity pressures. Moderna's removal may lead to an estimated $719 million in selling, or over 17.3 million shares offloaded. These changes could impact the companies' market capitalization and trading volumes, with potential implications for their stock prices and investor sentiment.



In conclusion, the annual reconstitution of the Nasdaq-100 Index brings significant changes to the index's composition, with potential impacts on market capitalization and liquidity. The addition of Palantir Technologies, Axon Enterprise, and MicroStrategy is expected to drive substantial buying activity, while the removal of Illumina, Super Micro Computer, and Moderna may result in significant selling pressure. Investors should closely monitor these changes and their potential effects on the overall market and individual companies.