- Cognizant has been removed from the Nasdaq 100 index after two decades
- The June rebalance favors AI and semiconductor firms over big tech software
- AI-linked companies like CoreWeave and Astera Labs were added to the index
Cognizant Technology Solutions Corp. has been dropped from the Nasdaq 100 index, effective June 22, for the first time in two decades.
The removal is part of the June quarterly rebalance and comes amid higher pressure on global software stocks, as market sentiment shifts towards AI-linked chipmakers like Micron Technology Inc. and Advanced Micro Devices Inc. (AMD).
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As part of the rejig AI-linked names including CoreWeave, Astera Labs among others have been added while Charter Communications, Insmed, Verisk Analytics, and Zscalerl have been removed.
The index rejig reflects a shift in composition towards AI and semiconductor themes, as opposed to big tech software names. Passive funds tracking Nasdaq-100 are likely to rebalance holdings as well.
However, it is important to note that the rebalance is not based on a company's performance.
The Nasdaq-100 tracks the performance of 100 of the largest non-financial companies listed on the Nasdaq stock exchange; it is tracked by over 200 investment products globally, with over $800 billion in assets under management.
The changes come at a time when investors have been closely watching forecasts of AI-related capital expenditure on buildouts and other technologies.
Even after Nvidia Chief Jensen Huang dispelled fears regarding AI making software companies obsolete by emphasising that it might be the best time to be a software company, Brokerages flagged some AI-linked disruptions for companies like Accenture, followed by subsequent downgrades and cut in target price.
Wall Street's Giving An AI Verdict?
The rebalance and choice of companies signals a wall street preference for AI, semiconductor-linked companies and also indicates that legacy IT services firms may be losing weight in key gloabal indices.
Along with this, passive funds such as index funds and ETFs will also tilt towards AI-focused names, highlighting a widening valuation gap between IT services companies and AI players.
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