The Nasdaq-100 contains 100 of the largest non-financial companies listed on the Nasdaq Stock Market. It is closely associated with technology because many of the world's largest software, semiconductor and internet companies trade on Nasdaq, but the index also includes consumer, healthcare and industrial businesses.

Microsoft, Apple, Nvidia, Amazon, Alphabet, Meta, Broadcom and Tesla are among the names investors most closely associate with the benchmark. Their size means the Nasdaq-100 is heavily influenced by mega-cap growth stocks.

Why financial companies are excluded

Unlike the S&P 500, the Nasdaq-100 excludes financial companies. Banks, insurers and diversified financial firms therefore do not offset technology exposure in the same way they do in broader market indices.

That rule helps explain why the index has historically been more sensitive to interest rates and growth expectations. Long-duration technology companies can command high valuations when discount rates are low and experience sharper multiple compression when yields rise.

The weighting is modified, not purely market-cap based

The Nasdaq-100 uses a modified market-cap weighting system. Large companies still receive the biggest weights, but the methodology includes constraints designed to prevent a small number of constituents from becoming too dominant.

Nasdaq can rebalance weights when concentration thresholds are breached. That makes the index less mechanically concentrated than a simple market-cap portfolio, although its largest holdings still account for a meaningful share of performance.

How it differs from the S&P 500

The S&P 500 is broader, includes financials and selects companies through an index committee. The Nasdaq-100 is exchange-based and concentrated in large non-financial Nasdaq listings. A company can therefore be a major S&P 500 constituent without appearing in the Nasdaq-100 if it trades on another exchange.

For investors, the practical difference is factor exposure. The Nasdaq-100 usually carries more technology and growth exposure, while the S&P 500 provides wider sector representation.

When the Nasdaq-100 is useful

The index is useful for investors who deliberately want exposure to large innovative companies, but it should not be mistaken for the whole US market. Its performance can diverge significantly from broader benchmarks when technology leadership strengthens or reverses.

Portfolio construction matters. An investor who already owns individual mega-cap technology stocks may duplicate those positions by adding a Nasdaq-100 fund. Looking through to the underlying holdings is therefore more important than the fund label.