40 Years of Innovation: How the Nasdaq-100® Became the Benchmark of the 21st Century

Companies can change the world. Every investor looks for them — and for 40 years, the Nasdaq-100 Index^® (NDX)^® has served as a showcase for the innovative companies that shape our daily lives.

Beginning in 1985, the Nasdaq-100 story runs through the foundations of steadfast retail favorites like Costco, to the rise of tech giants like Apple and Microsoft. Composed of 100 of the largest non-financial companies listed on The Nasdaq Stock Market^®  by market cap, the index is reconstituted annually to ensure it reflects the ever-evolving landscape of innovation and growth. 

From an investor’s perspective, the diversified Nasdaq-100 endures as a resilient and powerful index — as an overview of the market and as a basis for investable products. Home to some of the most innovative companies in the world, the Nasdaq-100 allows all types of traders to invest in the names they know and love.

Tech Tilt

Since its inception 40 years ago, the Nasdaq-100 has been a chief witness to the growth of tech stocks — although its original purpose was simply to track non-financial companies. Indeed, in 1985 the first iteration of the Nasdaq-100 had a 25.1% technology weighting, rising swiftly to 56.7% by the time the tech boom had taken hold in 1995. Today, it contains all Magnificent 7 stocks in its top 10 holdings, with Apple being the most heavily weighted security at 9.8%.¹ Apple was first listed on Nasdaq in 1980 and was an original member of Nasdaq-100 at its inception — but few companies can say the same. In fact, only six of these original members remain in today’s index and, of those originals, four are in the tech sector.

It’s no wonder that tech companies still account for over half of the value of the Nasdaq-100 — but the changing composition of the index mirrors the pace of transformation across all sectors. In recent years, a number of industry-changing innovations have become evident in the Nasdaq-100’s vast and varied composition. While growing demand for green energy has seen newcomers such as Constellation Energy join the index, the advancement of the gig economy is also clear from the inclusion of household names like Airbnb and DoorDash, added to the index in 2021 and 2023 respectively.

The Customer Is Always Right

The familiar Nasdaq-100 names don’t end there. Consumer companies have been an important component of the index since inception, and consumer discretionary stocks currently represent the second-largest sector in the Nasdaq-100. Many Nasdaq-100 companies are those you’d regularly come across in an ad on TV or social media, and the extent of their influence is evident in our everyday lives. 

Notable consumer-focused entrants include brands like Lululemon, Netflix and PayPal, each earning their place amid the fluctuating (and sometimes fickle) favor of consumer tastes. Added to the index in 2013, Netflix has continued to withstand pressure from its competitors in the world’s most-watched race, the “streaming wars”, reporting a record-breaking quarter in Q4 2024 for new subscribers. From its roots in rolling out the subscription-based model, to the rise of the Netflix Original, to its recent entry into live sports broadcasting, Netflix has reinvented itself many times over — a feat that underscores the mechanism of innovation that typifies a Nasdaq-100 company. 

For all the focus on innovation, the Nasdaq-100 isn’t without its stalwarts. As a long-standing member, Costco remains one of the most well-known stocks in the index. The company’s broad-based, brick-and-mortar offering continued to resonate with consumers throughout the dot-com bubble and the shift to e-commerce, serving as a unique model of business innovation that has thrived off of deep-set customer loyalty and stability. That approach has kept Costco’s name at the forefront of retail — and of the Nasdaq-100, too, with a 2.6% weighting.¹ 

For Traders: The Nasdaq-100 Index

As an investment, the Nasdaq-100 Index endures as an invaluable tool. Fundamentally, the index serves as a well-regarded benchmark for the performance of non-financial stocks on the US market and, by extension, a window into wider market trends. Traders can use it to gauge investor sentiment across these markets, and as a reference point for navigating market volatility. It’s also widely reported-on, with many major financial news outlets delivering real-time updates on the index’s daily price movements.

For retail traders, products based on the Nasdaq-100 Index can also provide a diversified investment that offers exposure to some of the largest companies in the world. The best way to do this depends on your investing goals, whether you want a passive/active investment, and your level of experience — but fortunately, there are choices that cater to investors of all kinds. 

1. ETFs

There are many exchange-traded funds tied to the Nasdaq-100. These funds generally consist of all stocks in the index and aim to track its performance, giving investors exposure to 100 securities in a single investment. ETFs are an ideal short-, medium- or long-term vehicle for traders looking to make a passive investment in the top 100 Nasdaq companies, and are accessible via your brokerage account. Invesco’s QQQ is a well-established Nasdaq-100 ETF and as of last year, was the second-most traded ETF in the US.

2. Index Options

For experienced investors looking to track the Nasdaq-100 index in their portfolio, Nasdaq-100 Index Options can provide a more active way to capitalize on the movements of these innovative companies. Investors may wish to leverage them to anticipate future price movements, protect a portfolio against a market correction, or generate income by selling options. In short, NDX Index Options make it possible for retail and institutional investors to gain exposure to equities or hedge downside risk. It’s a suitable strategy for investors who are comfortable assuming risk in pursuit of returns.

3. Futures

Nasdaq-100 futures contracts are another way for active traders to capitalize on or hedge against potential swings of Nasdaq-100 stocks by trading a contract tied to the entire index. Unlike ETFs and index options, futures trade nearly 24 hours a day, Sunday through Friday. Consequently, the global futures marketplace offers high liquidity, meaning they can be traded efficiently. As leveraged instruments, they offer you more exposure for a smaller upfront cost — with the E-mini Nasdaq-100 futures products offering a popular alternative to ETFs or individual stocks within the index. This leverage, which can amplify both gains and losses, means they are best suited to those who are able to assume a higher degree of risk. 

However you choose to use it, the Nasdaq-100 is a dynamic tool that helps us understand the direction of markets and beyond. Throughout its history, the index has held up a mirror to the evolving landscape of innovation and been a home to the companies that mark our everyday lives. As the index enters its 40th year, we continue to look to Nasdaq-100 companies as visionaries and changemakers — and invariably, they continue to shape our world.