America's largest technology companies are represented in the Nasdaq-100 index, but its performance is heavily influenced by just a handful of stocks.
The Nasdaq-100 index is made up of the 100 largest non-financial companies listed on the Nasdaq stock exchange. It's often used as a barometer for the performance of the technology sector, but it also features stocks from the retail, healthcare, transportation, and media industries.
The Nasdaq-100 is weighted by market capitalization, which means larger companies have a greater influence over its performance than smaller companies. The proliferation of artificial intelligence (AI) is driving a surge in the value of some of America's trillion-dollar tech stocks, and the following five now make up 35.9% of the entire index:
- Microsoft (MSFT 1.77%) has a market cap of $3.3 trillion.
- Apple (AAPL 1.72%) has a market cap of $3.2 trillion.
- Nvidia (NVDA 6.53%) has a market cap of $3 trillion.
- Alphabet (GOOG 1.21%) (GOOGL 1.15%) has a market cap of $2.2 trillion.
- Amazon (AMZN 2.06%) has a market cap of $2 trillion.
The Nasdaq-100 is up 18.9% so far in 2024. However, the Nasdaq-100 Equal Weighted index -- which assigns the same representation to all 100 companies regardless of size -- is up just 6.2%. The difference can be explained (in part) by the outperformance of the above five stocks, which have delivered an average return of 47.3% year to date.
Each of the five companies has a track record of success spanning decades, and they are now deploying their vast financial resources to dominate the fast-growing AI industry. If they succeed, they could have an even greater influence over the Nasdaq-100 in the future.
1. Microsoft: 8.71% of the Nasdaq-100
Microsoft is the world's largest company, which is an impressive feat given it was founded way back in 1975. To maintain its near 50-year track record of success, Microsoft had to expand beyond its roots in software development by moving into other growth industries like gaming, cloud computing, and now, AI.
Microsoft agreed to invest $10 billion in ChatGPT creator OpenAI last year, and it used the start-up's latest GPT-4 models to develop its own virtual assistant called Copilot. It's capable of answering complex questions, and generating text, images, and computer code on command. Copilot is now integrated into some of Microsoft's flagship products including Windows, Edge, Bing, and 365 (Word, Excel, PowerPoint, and more), to help businesses and consumers increase their productivity.
Enterprises can also access OpenAI's models through the Microsoft Azure cloud platform, which they can use to develop their own AI applications. Microsoft says 65% of the Fortune 500 companies are already using Azure OpenAI Service, which speaks to the surging demand for this new technology.
Microsoft is a widely recognized leader in AI, and the company is likely to continue creating value for investors over the long term.
2. Apple: 8.5% of the Nasdaq-100
There are more than 2.2 billion active Apple devices worldwide, which includes the flagship iPhone, the iPad, and the Mac line of computers. Apple recently announced its own AI software called Apple Intelligence, which was developed in partnership with OpenAI, and it could make the company the world's largest distributor of AI to consumers.
Apple Intelligence is expected to launch with the iOS 18 operating system in September. It will transform existing Apple features like the Siri voice assistant, which will draw on the powerful capabilities of ChatGPT. Plus, users will be able to instantly craft text content inside writing tools like Notes, iMessage, and Mail.
Apple Intelligence could drive a significant upgrade cycle when the new iPhone 16 smartphone is released later this year, which is expected to come with a new chipset designed specifically for processing AI workloads on-device. Apple's gigantic installed base places it at the forefront of AI's shift away from the data center and into the devices we use each day.
3. Nvidia: 7.89% of the Nasdaq-100
Nvidia was a $360 billion company at the start of 2023. In just the last 18 months, it added $2.7 trillion to its market cap to join the $3 trillion club alongside Apple and Microsoft. The company's incredible growth stems from surging demand for its graphics processing units (GPUs) for the data center, which are the best in the world for training and inferencing AI models.
Nvidia's H100 GPU set the industry benchmark, but the company is gearing up to ship a new generation of chips based on its more advanced Blackwell architecture. Its upcoming GB200, for example, can inference AI models 5 times faster than the H100, which could save developers substantial amounts of money as they typically pay for computing capacity by the minute.
Nvidia's data center revenue soared 427% year over year during the recent fiscal 2025 first quarter (ended April 28), coming in at a record $22.6 billion. Competition is ramping up but Nvidia remains comfortably ahead, so its run of success looks set to continue (at least in the near term).
4. Alphabet: 5.54% of the Nasdaq-100
Alphabet is the tech conglomerate behind Google, YouTube, Waymo, DeepMind, and more. Google Search remains the organization's largest source of revenue, and considering it has been the window to the internet for over two decades, it arguably has more valuable data with which to develop AI than any other company.
Alphabet has developed a series of AI models, culminating in Gemini, which is designed to compete with OpenAI's GPT-4. Gemini operates as a stand-alone chatbot, but it can also be integrated into popular Google Workspace applications like Docs, Sheets, and Gmail for an extra fee, allowing users to rapidly craft content and boost their productivity.
Google Search now also uses generative AI to deliver text-based responses to queries, saving users from having to sift through web pages looking for answers. It's helping to fend off threats from competitors like Microsoft Bing, which is powered by ChatGPT.
Investors seem to appreciate Alphabet's AI progress, because they have catapulted its stock to an all-time high this year and right into the $2 trillion club.
5. Amazon: 5.33% of the Nasdaq-100
Amazon is one of the most versatile AI companies. The technology powers the recommendation engine on its globally dominant e-commerce website, amazon.com, which learns what products customers like to buy and shows them similar ones in an effort to boost sales. Plus, it offers sellers a suite of AI tools to help them craft more engaging product descriptions, images, and advertisem*nts.
Amazon is also home to the world's largest cloud platform, Amazon Web Services (AWS), which designed its own AI data center chips, called Trainium and Inferentia; its own family of large language models (LLMs), called Titan; and even its own virtual assistant, called Amazon Q. Plus, Amazon invested $4 billion in leading AI start-up Anthropic, which now uses AWS as its primary cloud provider and has committed to training its future models using Amazon's chips.
Amazon hopes this will entice other start-ups and AI developers into the AWS ecosystem, giving it the edge over competitors like Microsoft Azure.
Amazon's valuation surpassed $2 trillion just last week on the back of its surging stock, which currently trades near an all-time high. That momentum is likely to build as the company reaps more rewards from its aggressive expansion into AI.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends Nasdaq and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
