Nasdaq-100 Rebalancing: eBay, Zoom, and Lucid Exit Index
Annual reconstitution removes six companies, including former growth darlings, triggering forced selling from tracker funds as DoorDash and MongoDB join.
A significant shift in one of the world's most closely watched equity benchmarks took place as Nasdaq executed its annual reconstitution of the Nasdaq-100 index. Six companies, including e-commerce pioneer eBay (EBAY), video conferencing giant Zoom (ZM), and electric vehicle maker Lucid Group (LCID), were removed from the influential index, effective prior to the market open on December 18, 2023.
The removal from the tech and growth-focused index forces the an automatic selling of these stocks by the dozens of passive exchange-traded funds (ETFs) and index funds that use the Nasdaq-100 as their benchmark. This non-fundamental selling pressure represents a significant headwind for the ejected companies.
The other firms removed were solar technology company Enphase Energy (ENPH), dental device maker Align Technology (ALGN), and Chinese e-commerce firm JD.com (JD). Their departure made way for a new cohort of companies reflecting the market's evolving landscape. The new additions include food delivery service DoorDash (DASH), database software company MongoDB (MDB), IT provider CDW Corp (CDW), Roper Technologies (ROP), Splunk (SPLK), and bottling company Coca-Cola Europacific Partners (CCEP), according to the official announcement.
The Nasdaq-100 comprises the 100 largest non-financial companies listed on the Nasdaq stock market and is rebalanced annually based on market capitalization. Exclusion from this elite group can impact investor perception and liquidity, beyond the immediate impact of institutional selling.
The list of departed companies tells a story of shifting market sentiment. Zoom, a company that became a household name and market phenom during the pandemic, has seen its growth trajectory cool considerably. With a market capitalization of around $26.4 billion, its stock has traded far below its pandemic-era highs. Similarly, Lucid Group, a one-time high-flyer in the EV space, has faced production challenges and intense competition, resulting in a market cap of approximately $4.2 billion and significant stock price declines.
E-commerce veteran eBay, with a market cap of over $38 billion, being replaced by the newer, app-based DoorDash highlights a generational shift in consumer-facing technology. The removal of Enphase Energy points to a broader cooling in the renewable energy sector, which saw intense investor enthusiasm in previous years but has since faced headwinds from interest rates and shifting subsidy landscapes.
The exclusion of JD.com reflects the persistent challenges and investor caution surrounding Chinese-listed equities, which have been subject to geopolitical tensions and domestic regulatory pressures.
For investors, the key takeaway is the direct impact of the rebalancing. Funds that track the Nasdaq-100, which manage hundreds of billions of dollars, were obligated to sell their positions in the six outgoing stocks and purchase shares of the six new entrants to match the index's new composition. While this event creates short-term price pressure, the future performance of the removed stocks will ultimately revert to their fundamental business performance, strategic execution, and ability to navigate their respective industry challenges.