Talk Your Book: How SpaceX Got Into the Nasdaq 100

Summary

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Animal Spirits Podcast: Talk Your Book — How SpaceX Got Into the Nasdaq 100

Episode Date: July 6, 2026

Hosts: Michael Batnick and Ben Carlson

Guest: Paul Schroeder, Director of Factor and QQQ Equity Product Strategy at Invesco

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Episode Overview

This Animal Spirits “Talk Your Book” episode takes an in-depth look at the recent inclusion of SpaceX into the NASDAQ 100, exploring how index methodology, float adjustments, and shifts in technology investing have transformed this flagship index. Hosts Michael Batnick and Ben Carlson are joined by Paul Schroeder from Invesco to break down the technical and strategic details behind such changes, address retail investor concerns, and contextualize current trends in index investing. Discussion highlights include the impact of fast entries, why the NASDAQ 100 continues to outperform, and how index construction shapes the investable tech universe.

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Key Discussion Points & Insights

1. NASDAQ 100: Index Dynamics and Recent Surprises

• Entry Rules and Innovation Focus:
  • To be included in the NASDAQ 100, a company must be listed on the NASDAQ exchange and must not be a financial company.

    “That’s the only real hard and fast requirement ... listed on the stock exchange, but also not be a financial.” — Paul [04:09]

  • The perception of NASDAQ 100 as a “tech-forward, innovation-based” index is broadly accurate, though the rules technically permit any qualifying large-cap to join, irrespective of sector.

    “Even though NASDAQ 100 has been pretty tech heavy ... it’s outperformed the tech sector, which I think is most interesting.” — Paul [05:54]

• The “Cream Rises” in Index Weightings:
  • Rapid changes in index leaders: Micron, for example, jumped from outside the top 10 to third-largest holding within three months due to its stellar performance.

    “Micron was not in the top 10 ... Today it's the third largest holding. That happened really, really fast.” — Ben [00:42]

  • Outsize moves in AI chip companies have shifted concentration away from traditional “Mag 7” names.

    “We went 30 minutes talking about the Qs ... not once ... did we mention a Mag 7 name.” — Michael [02:51]

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2. The SpaceX IPO & Fast Entry Provisions

• Unprecedented Attention for Index Inclusion:

  • SpaceX’s IPO has driven extraordinary interest in index methodology and inclusion rules, sparking debates about rule changes, float considerations, and the role of mega-IPOs.

    “This has been one of the busiest times that I've had in my job covering the Qs for the past six years.” — Paul [09:43] "It would be weird if a multi-trillion dollar market cap company was not in the index." — Michael [11:07]

• Fast Entry Mechanics and Float Adjustments:

  • NASDAQ 100 fast entry allows exceptional new listings (like SpaceX) to be added outside the usual annual process, using a float-based multiplier for capped weighting.

    “If that free float number is less than 1/3 of the total market cap, NASDAQ applies a flat 3x multiplier to that free float ... SpaceX today has a free float of approximately $85 billion. Their total market cap is closer to, you know, $1.75 to $2 trillion.” — Paul [11:46]

  • Result: SpaceX is weighted in the index at 1.2–1.4% initially, preventing “excessive” single-stock risk while still offering exposure.

    “It'll probably be at a weight between 1.2 to 1.4%, depending on how the market moves.” — Paul [12:46]

• Contrast With S&P 500:

  • The S&P 500 still uses a 12-month seasoning rule and profitability filter, with no fast entry provision—meaning blockbuster listings like SpaceX are included much later.

    “They ruled that they are not adding a fast entry provision ... and they still have their 12 month seasoning process.” — Paul [14:12]

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3. Core Portfolio Allocation: NASDAQ 100 vs. S&P 500

• Shifts in investor behavior have seen QQQ and QQQM become “anchor” holdings for a broad segment, not just growth enthusiasts.

  “NASDAQ 100, QQQ and QQQM account for 27% of all AUM within the Large Cap Growth ETF category in the U.S.” — Paul [08:39] “So it's a quarter of all large cap growth money is now somehow tied to the NASDAQ 100?” — Ben [09:04]

• Hosts debate whether investors should have started splitting S&P 500 allocations for “core portfolios” sooner, agreeing that the shift has been underway for years.

  “Is it time to split our core portfolio to 50-50 Nasdaq 100-to-S&P?” — Listener email [07:23] “I think the brand is there probably to be a more core position.” — Ben [08:30]

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4. The Outperformance of NASDAQ 100 and Index Construction

• Fundamental Drivers, Not Random Luck:

  • Long-term outperformance (nearly 20% annualized returns for over 15 years) is tied to persistent fundamental growth, not “randomness” or mere concentration.

    “Last 15 years I think earnings were up 15% per year, 14%. So it's like, you're right, the fundamentals have been driving this.” — Michael [20:26] “What drives long-term performance, it’s fundamentals, right? Price follows fundamentals. You see earnings and revenue growth outpace that of the S&P 500 ...” — Paul [19:09]

• Innovation as a Persistent Edge:

  • NASDAQ-listed companies have repeatedly capitalized on paradigm shifts (Internet, smartphones, AI, social media, COVID work-from-home, etc.).

    “That's pretty consistent through many of these names that are Nasdaq 100 heavyweights, which most importantly has driven the strong fundamental growth.” — Paul [19:59]

• Market Cap & Free Float Nuances:

  • Index rebalance uses both total market cap and available float, often impacting weights dramatically (e.g. Meta and Micron).

    “Meta's market cap is larger than Micron and yet Micron is a 5.7% weight. ... Meta is 2.6%.” — Michael [24:21]

  • Large insider holdings (e.g. Walmart, Meta) reduce effective index weight, sometimes making outwardly smaller companies have relatively larger positions.

    “Walmart is the same size as Applied materials. ... The Walton family owns so much of Walmart ... its full market cap is not in the index.” — Michael [25:08] “Last I looked, Meta's free float was around 80 to 85%.” — Paul [24:36]

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5. The Broadening Tech Trade: From Mega-Caps to “Juniors”

• Attention has started shifting to next-generation tech stocks (QQQJ), with investors seeking opportunities outside of core cloud/AI giants as returns broaden.

  “There has been more interest within QQQJ through the year ... that AI trade starting to broaden out outside of GPUs.” — Paul [26:10] “Now that performance is there and has been there for the past 12 to 18 months, people have been moving more into J.” — Paul [27:26]

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Notable Quotes & Memorable Moments

• On Index Fast Entry:
  “It would be weird if a multi trillion dollar market cap company was not in the index.” — Michael [11:07]

• On NASDAQ Brand Strength:
  “We are the 500 pound gorilla there within that space.” — Paul [08:39]

• Index Inclusion Anxieties:
  “Are you surprised at the degree to which people have seemingly cared about index inclusion rules...?” — Ben [09:11]
  “This has been one of the busiest times that I've had in my job covering the queues for the past six years.” — Paul [09:43]

• On Risk & Outperformance:
  “Of course you're going to go through periods of outperformance, underperformance ... But when that does happen, I'm confident with the value that these companies have shown.” — Paul [21:31]

• On Index Construction & Fairness:
  “When you do these quarterly rebalances for the NASDAQ 100, how much turnover is there typically when that happens?” — Michael [25:23]
  “On average, QQQ and QQQM are turning over anywhere between 6% to 8% on an annual basis.” — Paul [25:29]

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Timestamps for Essential Segments

| Topic | Timestamp | |-----------------------------------------------------|---------------| | Rapid changes in top NASDAQ holdings (Micron surge) | 00:42–02:51 | | NASDAQ 100 inclusion rules and methodology basics | 03:52–07:23 | | Core portfolio allocations: NASDAQ 100 vs. S&P 500 | 07:23–09:11 | | Retail/investor focus on SpaceX inclusion | 09:11–11:46 | | SpaceX weighting and float mechanics | 11:46–14:12 | | Private market vs. public market investing | 15:15–17:34 | | Why NASDAQ 100 outperforms, innovation focus | 17:34–20:55 | | Index concentration, free float, and rebalance | 22:17–25:29 | | Growth in QQQJ (next-gen tech, “juniors”) | 25:56–27:41 |

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Additional Insights

• Flexibility vs. Transparency: The NASDAQ 100 thrives on both adaptive rules (e.g. fast entry, float adjustments) and clear, visible methodology—contrasted with the more “committee-driven” S&P approach. [14:12]
• Impact of Staying Private: Companies staying private longer has disproportionately affected small-cap indexes more than large-caps. [15:59]
• Investor Takeaways: Index products like QQQ and QQQM offer exposure to the innovation-led market leaders with risk controls, especially as single-stock volatility (e.g. during big IPOs) remains high. [13:50, 11:46]

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Conclusion

This episode offered a behind-the-scenes look at how the NASDAQ 100 adapts to generational changes in technology, the challenges of incorporating massive new listings (like SpaceX), and why the index’s design continues to deliver for innovation-minded investors. For anyone curious about index rules, portfolio construction, or the evolution of tech investing, this was a revealing and timely conversation.

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Transcript

[A]

Today's Animal Spirits Talk youk Book is brought to you by invesco. Go to invesco.com to learn more about the NASDAQ 100 ETF QQQ and their whole other innovation suite of ETFs. Invesco.com to learn more.

[B]

Welcome to Animal Spirits, a show about markets, life and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.

[A]

Welcome to Animal Spirits with Michael and Ben. Michael, you always give me flack about my granite hedging capabilities. I think it's a gift. You think it's a. You think it's a crutch sometimes. Someone asked us I don't know two years ago what's the best way to invest in AI And I said my Grand Rapids Hedge is just own the NASDAQ 100. I think that's the easiest way you're going to get the winners. The winners will rise to the top. Listen to this stat. We talked about Micron a little bit and how it's now the third largest company in the QQQ ETF. Right? Pretty crazy. It's over a 5% position as of April 2026 and we're recording this on June 29, 2026. In April of 2026 Y charts has the ability to look back at the holdings over different months in different time periods. Micron was not in the top 10 of the QS in April two months ago. Today it's the third largest holding. That happened really really fast. Right. And that's what I meant by the cream rises to the top. The winners will sort themselves out. It's not like this was a three year thing. This was a three month thing. Wow. Of going from outside the top ten to the third largest holding in the index.

[C]

I'll do you one better or not to one up you. I will. I will do you one equal Ben. Micron year to date is up two hundred and ninety percent. It has added alone 5.2% to the year to date performance for the NASDAQ 100. If you own the QS, 5.2% of your year to date gain is from micron. Another 2.8% is from AMD and this is in order 2.5% is from Intel, 17 from Applied Materials and 1. 5 each from Lam Research and SanDisk.

[D]

And.

[C]

All right, so let me do some math, Ben.

[A]

Not exactly the household names that you'd

[C]

expect, but that's the AI trade. So the top. The top. And then it's lam Research and SanDisk and KLA Corp and Marvell and Cisco and Western Dig. These are all AI. So. Ben, Take a bath. Sir, you nailed it.

[A]

But we didn't talk about Google or Meta or Microsoft or even Nvidia in there. That's pretty wild when you think about it.

[C]

You know what, how the changes have timed. Ben, we went 30 minutes talking about the queues and to your point, not once, I don't think did we mention a Mag 7 name. Literally. No, I, no, no. I just said how come Micron is so much bigger than Meta?

[A]

Yeah, which is. You're right. Micron is now has twice the size in index as Meta. Pretty crazy. We've talked to Paul Schroeder before. Paul is the director of Factor and QQQ Equity Product Strategy. And of course we talked about the biggest topic everyone's been talking about in recent months. SpaceX IPO. When will it be included in the index? How does the NASDAQ 100 methodology work? Michael, I feel like you've been very schooled on this. This has been something that you've poured your heart and soul into.

[C]

Which part?

[A]

Index methodology.

[C]

Oh, well, we were getting questions.

[A]

Yes. So we go into the whole thing. How the NASDAQ 100 works, how they make these decisions, how big of a position SpaceX will be, all that and more. Here is our conversation with Paul Schroeder from Invesco.

[C]

Paul, welcome back.

[D]

Hey, thanks for having me, Michael. Good to be here.

[C]

All right, we'll start with a question that I should know the answer to. In fact, I do know the answer to this. But for the audience who doesn't, for stocks to get into the NASDAQ 100, do they need to be listed on the NASDAQ exchange?

[D]

That's correct. That's the only real hard and fast requirement to be included within the NASDAQ 100 is that you need to be listed on the stock exchange, but also not be a financial.

[C]

Okay, all right, I'm starting with the hard hitting questions. Question number two. This is, this is an index that has been thought of as a tech forward, innovation based. I'm sure there are tons of companies that want to be included in the NASDAQ 100 for reasons that are very obvious. It's got the brand recognition and the cachet. And then of course there's the, the, the fund flows which don't hurt. Is it simply the top market cap companies or is there more to it than that?

[D]

There is a little bit more to that with, with the rule changes that occurred. It used to be just a straight market cap weighted index with certain rules in place to keep it compliant with registered investment company concentration rules. But they, they essentially switch to a lesser of function where they're looking also and taking into account free float as more of a weight determiner, especially for some of these companies that do have a lower free float. So it did get a little bit more complex. But at the end of the day, the largest companies are still getting the largest weights.

[C]

How do you make sure that the integrity of the intent of the NASDAQ technology is maintained? So like what if for example, the most boring company in the world wants to go from, I don't know, the New York Stock Exchange over the Nasdaq and you say, hey, wait a minute, get out of here. Walmart, no offense, like this or actually, you know what, Walmart is pretty innovative. Whatever, Clorox, like a stodgy consumer staples company. What if they want to come? Would you welcome the business? Like how would that work?

[D]

Yeah, so you're exactly right with the methodology of the NASDAQ 100 being as simplistic as it is a company like you mentioned, Walmart moving in in January because they switched listings if Clorox wanted to switch, you know, name any of these consumer stable companies that I think a lot of people wouldn't necessarily associate with the tech heavy NASDAQ 100. They, they would be included if their, their market cap included them. You know, if it was high enough. With all that being said though, you know, I would welcome it. You know, I, Even though NASDAQ 100 has been pretty tech heavy, 50 to 60%, you know, depending on which classification system you're looking at, it's outperformed the tech sector, which I think is most interesting with, while having 40% less of that exposure. But I think overall what NASDAQ is really striving to do is to have the NASDAQ 100 be not just large cap growth benchmark, but just large cap in general for the US market. So I think listing on NASDAQ has shown to do very well for your company. If you do that overall. You also see Nasdaq winning the IPO race through the years and obviously getting notable changes like Walmart to their exchange Overall. So I would welcome those sort of companies to come in because I'm very confident in the company's that are already there with providing that tech innovation weight overall.

[C]

Ben, I'm sorry, I've got just one more and I was going to let you speak, but this is very timely. We got an email from a listener and it said the subject line was core portfolio change and it said, hey guys, most people probably use the s and P500 as their core piece of their portfolio. The investment world is always changing. Dow Jones S and P. Now we have the NASDAQ 100. I've always done 60 to 70% s and P as my core. Then I have my random. Okay, looking back at the last 20 years since tech has taken over the world, the NASDAQ 100 has outperformed by 4 to 5% over 20 years. The NASDAQ 100 is more concentrated, of course. Is it time to split our core portfolio to 50? 50 Nasdaq 100-to S& P. And the truth is Paul, I didn't respond to this person even though we are, we are branded as personal emails. Personal responses. I kind of not to be rude to the emailer because we love all emails. Ben, do you agree this is like an email from 2018?

[A]

What do you think it's a little too late for that?

[C]

What like yeah, listen, The S&P 500 is the S&P 500. But people, people have been thinking more and more about the NASDAQ for a long time now.

[A]

I think the brand is there probably to be a more core position. Paul, I'm sure you hear that a lot like that. Most, a lot of investors do have that as an anchor in their portfolio now. Correct?

[D]

100%. It's been a pretty consistent narrative that we've seen. I mean NASDAQ 100, QQQ and QQQM account for 27% of all a within the Large Cap Growth ETF category in the U.S. we are the 500 pound gorilla there within that space. And that is because more and more people, especially since COVID have used the Q's and QQM as the core part of their portfolio.

[A]

So it's a quarter of all large cap growth money is now somehow tied to the NASDAQ 100. Is that what you said?

[D]

That's correct.

[C]

Wow.

[A]

Wow. That's probably bigger than I thought. So a lot of people obviously are already there. Let's talk about the rocket ship in the room. Are you surprised at the degree to which people have seemingly cared about Index inclusion rules in the past month or so because there obviously are people who have very strong opinions about this and people are, it seems like a lot of people are maybe learning on the fly about how this all works when it comes to a large ipo. I'm just curious if you're surprised at the degree to which the attention that this SpaceX IPO has gotten in terms of index inclusion.

[D]

Yeah, I would agree with that statement over and over, Ben. Like this has been one of the busiest times that I've had in my job covering the queues for the past six years. Now that, that, that I've seen, you know, I mean 2023 was pretty busy when NASDAQ 100 went through a special rebound, but that was about a week and a half long. This has been pretty consistent over the last month and I think it's a convergence of a few different timely topics. Right. Obviously everyone loves talking about Elon Musk, what he's doing, whether you like him or not. And then the valuation of space X. You know, before pre IPO people were saying 1.5 to 2 trillion. We haven't seen an IPO like that before. So I think all those different things have raised interest among investors. Along with the change of the fast century rules that NASDAQ released in May,

[C]

there was a certain cohort of people who do not like Elon Musk, do not like the inclusion. Oh, you're changing the rules. I think this rule change is frankly overdue. Now maybe it hasn't been necessary because private companies have been staying private for so long that we haven't had IPOs of this size, but I think it would be weird if the NASDAQ 100 was not in the index. Wait, what did I just say?

[A]

SpaceX in NASDAQ?

[C]

What did I say? I said NASDAQ. Yeah, yeah. Okay. I think it would be weird if a multi trillion dollar market cap company was not in the index. And I think what Nasdaq, I know you work for Invesco, what Nasdaq, what they're doing with the NASDAQ 100 in terms of making sure that it is not over represented in the index and adjusting for the float makes a lot of sense. So it's not like investors have to swallow $2 trillion of Elon Musk. Can you talk about what that inclusion is going to look like and how you all are adjusting for what's available?

[D]

I really appreciate how NASDAQ approach fast entry in general. And as you alluded to, fast entry isn't something that's completely new. Other index providers have had it right. Russell, msci, Crisp, they all have fast entry provisions. So it's nothing new. And Michael, to the point that you made, I would be surprised if a company like SpaceX, which definitely has the pedigree of being a NASDAQ 100 company, wasn't included. So throughout all the conversations I've had over the past few weeks, it comes down to, okay, how's it going to be weighted? Right? And basically looking at free float versus total market cap, and if that free float number is less than 1/3 of the total market cap, NASDAQ applies a flat 3x multiplier to that free float to give you the modified market cap weight. So I know that's a lot of jargon. What does this actually look and feel like with SpaceX? So SpaceX today has a free float of approximately 85 billion. Their total market cap is closer to, you know, 1.75 to 2 trillion. So that is definitely under that 1/3 threshold. You multiply that 85 billion times three, which gives you the weight it comes in to the NASDAQ 100, which will be after the close on July 7th. They just made that announcement on Friday. And it'll probably be at a weight between 1.2 to 1.4%, depending on how the market moves. Not just SpaceX, but the other components of the NASDAQ 100 as well. So the amount of attention that it's gotten, the inclusion, I'm glad that it's there because you have a lot of individual investors who are saying, maybe I should just go out and buy SpaceX. But when you see SpaceX trade between 150 and $229 in the first few weeks of trading, it's like, how do you commit serious capital to that without worrying about the extra volatility that might come with it? Nasdaq 100 allows at a pretty decent weight compared to some of these other indexes to give you exposure to a company.

[A]

I'm curious, maybe you walk us through some of the history. How flexible have these committees been in the past? Because I think some people think that it's just totally robotic and there's rules that you follow and you have to follow the rules. But obviously the market environment is changing and the index providers are changing with it. Just maybe walk us through, like, how much flexibility there is in this process.

[D]

I think with an index like NASDAQ 100, there's a phenomenal amount of flexibility. But I think what's more important, there's A great deal of transparency. Right. We know any investor could go and look up the methodology of NASDAQ 100 and see if a company is going to be included or not, if it lists newly and if it's a newly listed IPO. Just to contrast that versus S&P, which is a fantastic company. But they ruled that they are not adding a fast entry provision. You know, they did that last month through a consultation process and they still have their 12 month seasoning process. They also have a profitability screen and then also a committee. Right. So I think when looking at these different ETFs, you have to assess and if investing in an IPO is important to you, we've also heard the exact opposite where I don't want to invest in these newly IPOs because they're not profitable. Right. I think you need to take all those different things into account about how these different index providers approach it and choose the one that aligns best with how you think.

[A]

So one of the big narratives around the private markets is the fact that these companies are staying private longer, is taking much longer to come public. You know, we're talking about multiple potentially trillion dollar IPOs this year. We've already had one. And some people think, well, hey, we're being left out. And it's kind of funny to think, I think over the last 15 years the NASDAQ 100, I look today is up almost 20% per year. So it's like 19% in change. We're recording this in late June. Do you think that investors really are missing out a lot by not being, not having some of these private markets come public earlier? Or do you think that really because the massive behemoths have, and mega caps have had a big part in all the gains, that it really wouldn't have as big of an impact as people think.

[D]

Where I would say we've probably seen the greatest effect, Ben has been within small cap. Right. I mean if we rewind the clock 25 years ago, traditional path company goes public, they're probably listed as a small cap company or a mid cap company and they make their way up. I think you can attribute that as part of the reason small cap has underperformed over the past 10, 15 years. But I think overall when you think about investing in private markets, it's a lot more complex than investing in public markets. You also are seeing more and more companies like Invesco and other asset managers providing other ways to gain access to that, which I think is most interesting. Now, whether or not that's still an appropriate investment for that investor. You know, only they could decide that probably with the help of a financial professional because they are more complex. But what I appreciate is how there has been more availability to access these private markets. And during this time while you see all these different valuations come out about whether they call them unicorn companies or these, these private companies that have grown in valuation, at the end of the day we still have broader market indexes perform very well throughout the time. So I wouldn't necessarily say investors have missed out especially over the last three years with the trade primarily being tech driven, AI focused. There's so many different investments out there available as a way to slice and dice that. And I think appropriately as these companies do go public, they are being included.

[C]

Why do you think the NASDAQ 100 has outperformed some other tech benchmarks? Like part of me thinks it's sort of random, but the app format seems to be persistent enough that it's and the size like 4 to 5% a year makes me question that assumption of it being random. Like is there anything, is it just market caps beating everything? Is it that simple?

[D]

Well, I think over the past three or five years everything's done well. Even though NASDAQ 100 has returned just under 20% per year. Right. Where I think it comes down to dispersion in the market. Right. How concentrated is that performance and where is the performance being driven from? We've had a handful of companies up until this year drive that strong outperformance. They are NASDAQ listed companies. They've grown to be very large. Right. And have been a key contributor of that outperformance. But I think when you look at it from a longer term basis, what you generally tend to see are more innovative and technologically focused companies list on the NASDAQ Stock Exchange. We quantify that by looking at how they focus on R and D, what sort of patents they're filing and what we really feel what has driven that longer term outperformance is these companies abilities to innovate and already have a product in place when there's a seismic shift that happens with how consumers behave. You look at Covid for example, right when the world changed overnight, world shut down. There were companies inside there that were well positioned for that work from home environment. If you go back in time though and take a look at whether it was the dawn of the Internet, the dispersion of smartphones and how they affect our lives, social media, which obviously is more of a plan like ad revenue, Nasdaq 100 companies are at the center adjacent of all those throughout the 21st century. You have these companies who have become the conglomerates of the 21st century as well. So I think of a company like Amazon, which started off as an online bookstore, trying to put Barnes and Noble out of business. They're now one of the largest web service providers in the world. Right. You know, so they went from two different areas of the market and where they're focusing, you know, and it's, they saw the market trend and have moved there pretty well. That's pretty consistent through many of these names that are Nasdaq 100 heavyweights, which most importantly has driven the strong fundamental growth that we've seen in the companies. We all know that although short term price may fluctuate what, what drives long term performance, it's fundamentals, right? Price follows fundamentals. You see earnings and revenue growth outpace that of the s and P500 and the Russell 1000 growth, which is the true driver of the longer term outperformance you've seen.

[A]

Michael, it is interesting because I did this a couple months ago, I mentioned the NASDAQ 100 is up almost 20% per year. Last 15 years I think earnings were up 15% per year, 14%. So it's like, you're right, the fundamentals have been driving this. Is there any part of you, and I'm asking to put your analyst hat on here, that's concerned that the performance has been so strong in the NASDAQ that going on, you know, 15, 20 years of high double digit performance, does that, does that concern you at all?

[D]

From a cyclical perspective, the prevalent outperformance that we've seen from QS and QM have made my job a lot easier through the years. And that's one thing that does make me worry, right? I mean, if you think about it in the context of today, where I'm sure you're hearing from your listeners, right, this is another tech bubble like we saw back in 1999 and 2000. Right. You know, you have only a few companies driving the performance. You know, whether it's government intervention or regulation or any other numbers, you know, whether it's private credit and the risk with that, the large capex spend these companies are doing, sure. Those are concerns that, that I do have. You know, what I really rely on though is that I'm just. When we run those fundamental growth numbers, right, we're just not looking over the past few years, we're looking at long term trends that have taken place over the past 25 years. You talk to Nasdaq, the index was incepted back in 1985. Technically QQQ didn't come around until 1999. That fundamental growth story, even with the tech bubble is still in place. Going back further. Right. So these are longer term trends in the market where of course you're going to go through periods of outperformance, underperformance with, with anything. But when that, that does happen, I'm confident with the value that these companies have shown the balance sheets that they have and the cash flow they've produced.

[C]

All right, I'm looking at the holdings and this surprised me. In order. Ben, listen up.

[D]

All right.

[C]

Nvidia 1, Apple 2, no surprises there. Number 3 Micron. What? Number 4 Microsoft. Number 5. Amazon. Number 6, 7, 8, 9, 10, 11, 12. Number 13 Meta. Micron is more than twice as large in the NASDAQ 100 as meta. And Paul, I'm going to put my Sherlock Holmes hat on here for a second. Is that because Mark Zuckerberg owns so much that is not, it is not counted in the free float adjustment?

[D]

Not necessarily. What I would say that comes down more to is just where Meta has been in the earnings that, that we've seen. If you think back to Q1's earnings announcement from Meta and where they've been, they've obviously been very vocal and they have spent a bunch on trying to have their AI build out come to speed with. I think those announcements coming to investor disappointment. I think another key factor specific to Meta that we've seen is taking a look at their capex versus their free cash flow and their free cash flow started to turn negative back in, in Q1 with the Q1 earnings announcement.

[C]

Paul, sorry to cut you off. I'm talking about the weighting of the, of the companies in the index. What does, what does all of the fundamental stuff have to do with it? Is it. Aren't we talking market cap?

[D]

We are, but I mean that market cap is a pure function of the per share price. Right. And if investors aren't liking their earnings announcements, they're not liking how much they spend. They may look at free cash flow and say that concerns me a little bit and they start selling Meta. Right. That's going to affect their total market cap and affect their weight within qqq and the NASDAQ 100.

[A]

Michael, are you thinking that Meta should be a bigger, a bigger weighting?

[C]

Meta's market cap is larger than Micron and yet Micron is a 5.7% weight. This is as of June 27th. Micron is 5.7% and Meta is 2.6%. It's twice as large, more than twice as large.

[D]

Last I looked, Meta's free float was around 80 to 85%. Right. So I don't have microns off offhand. But what you'll see though in between quarterly rebalances is that you may see positions that have performed really well or really poorly move slightly. Right. And at the quarterly rebalances, Nasdaq 1 Nasdaq will rerun the weighting methodology, right? Not necessarily make new additions or subtractions, but re rank them.

[C]

Well, another example of this is like, not to belabor the point, but Walmart is the same size as Applied materials. Basically it's 30 basis points larger. But the Walton family owns so much of Walmart that it is not. Its full market cap is not in the index.

[D]

That is correct.

[A]

So Paul, how much? So when you do these quarterly rebalances for the NASDAQ 100, how much turnover is there typically when that happens?

[D]

A few percentage points, not that much. I mean, on average, QQQ and QQQM are turning over anywhere between 6 to 8% on an annual basis. Right. So it's not a huge number with most of that 5 to 6% coming in the annual reconstitution. So that's where most of it is coming from. The quarterly rebalances are primarily just to make sure that the integrity is in line with the true method, with the methodology.

[C]

How much interest is there? And I know this may be a tough question to answer. Is there a lot of interest in the J's, the next generation, the juniors, or people just more paying attention to the mega caps? Because that's what's worked for so long.

[D]

There has been more interest within QQQJ through the year where we're actually seeing organic flow come into it. And I think it is because if you think back basically since October of last year, right, where cracks within certain parts of the AI trade showed up, questions about private credit, how's capex being funded? Along with software getting smacked pretty good, people have started to diversify. Obviously what we've seen happen in Korea and really what's been happening within QQQJ over the past 10 months, is that AI trade starting to broaden out outside of GPUs, right. Everyone was so focused on GPOS from 23 through end of 24, 25. The move we saw memory prices start to rise back in 2025 pretty, pretty dramatically. Not just like RAM prices, but also storage prices as well. Where you see companies like SanDisk, Western Digital, Seagate perform very well. All companies that were once in qqqj. So I think what we're naturally seeing in the market and it's expressed very well, I think in the Q's and J, is that with any new technology you do see a broadening out. I think at the end of the day we are going to see winners and losers. But I think concerns over how MAG7's been performing along with concentration in Mega Cap in general, more people have been broadening out and now that performance is there and has been there for the past 12 to 18 months, people have been moving more into J. Paul, for

[A]

people who want to learn more about the Qs or Invesco and their whole suite of innovative ETFs, where do we send them?

[D]

Yes, they go to Investco. Com.

[A]

Perfect. Thanks, Paul.

[D]

Thank you.

[A]

All right, thanks to Paul. Remember, check out investco.com to learn more about the NASDAQ 100 ETF and all their other ETFs. Email us animalspirits@the compoundnews.com.