Cathie Wood's ARK Innovation ETF has been on the rise following the announcement that the Nasdaq 100 will rebalance the weightings of its constituents.
On July 7, Nasdaq announced that the Nasdaq 100 index will be undergoing a "Special Rebalance" before the market opens on July 24. This rebalance is meant to address "overconcentration in the index" following major gains of the " big seven" megacap tech stocks, including Apple $(AAPL)$ and Microsoft $(MSFT)$.
ARK Innovation (ticker: ARKK) is mostly made up of smaller, unprofitable tech stocks, including Coinbase Global $(COIN)$, Roku $(ROKU)$, and DraftKings $(DKNG)$. The only two stocks in ARK Innovation that are a part of the big seven megacap names are Tesla $(TSLA)$, which holds the most weight in the ETF, and Meta Platforms $(META)$.
These large-cap tech stocks have surged this year as investors have bought up shares of companies with exposure to artificial intelligence.
With the rebalancing of the Nasdaq 100, indexers will have to sell some of their holdings in the largest-cap stocks, and add to their positions in smaller-cap names. Shares of Apple were down 0.3% Tuesday while Microsoft dropped 1% and Tesla declined 0.2%. Components of ARK Innovation were trading higher, helping Wood's portfolio. Zoom Video Communications (ZM) gained 2.2%, Block (SQ) rose 2.8%, and UiPath (PATH) was 3.5% higher.
ARK Innovation had risen 1.2% on Tuesday to $45.90, and was on pace for its highest close since August 2022, according to Dow Jones Market Data. The ETF was up for three consecutive days, or 6.2% over this period.
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