Nasdaq 100 History, Companies & Ways to Access

The Nasdaq 100 stands as one of the world's most influential stock market indices, tracking 100 of the largest non-financial companies listed on the Nasdaq Stock Exchange. Since its launch on 31st January 1985, this technology-focused index has become a barometer for innovation-driven sectors, housing industry giants such as Apple, Microsoft, Amazon, and Nvidia.

The Nasdaq Stock Market itself revolutionised securities trading when it opened on 8 February 1971 as the world's first fully electronic stock exchange. Founded by the National Association of Securities Dealers (NASD), it eliminated the traditional trading floor in favour of a computerised system that enabled rapid, efficient trading across the United States.

TL;DR: Key Takeaways

• The Nasdaq 100 was launched on 31 January 1985 to track the 100 largest non-financial companies on the Nasdaq exchange
• The index gained 582% between 1995 and 2000 before losing 78% during the dot-com bubble burst
• Companies must meet strict criteria, including minimum market capitalisation, trading volume of 200,000 shares daily, and exclusive Nasdaq listing
• Traders can gain exposure to all 100 companies through the Nasdaq 100 CFDs on Plus500

The Birth of Electronic Trading: Nasdaq's Revolutionary Beginning

Before understanding the Nasdaq 100, one must appreciate the groundbreaking nature of its parent exchange. When the Nasdaq Stock Market commenced operations on 8th February 1971, it represented a paradigm shift in securities trading (Library of Congress). For the first time in financial history, a major exchange operated without a physical trading floor, relying entirely on electronic systems to match buyers and sellers.

This technological innovation attracted a new generation of companies, particularly in the burgeoning technology sector. Firms such as Intel, Microsoft, and Oracle chose the Nasdaq over traditional exchanges, drawn by its modern infrastructure and appeal to growth-oriented investors.

By the mid-1980s, the Nasdaq had established itself as the premier venue for technology listings, creating the perfect environment for a specialised index focused on the market's most innovative companies.

1985: The Nasdaq 100 Index is Launched

On 31st January 1985, the National Association of Securities Dealers officially launched the Nasdaq-100 Index® (NDX®) as "a new, technology- and innovation-focused index tracking 100 of the largest non-financial companies listed on the Nasdaq Stock Market®." The decision to exclude financial companies was deliberate, allowing the index to maintain its focus on growth sectors driving economic innovation.

The timing proved prescient. The 1980s witnessed the personal computer revolution, the rise of software companies, and the birth of modern biotechnology. The Nasdaq 100 captured this transformation, providing investors with a single instrument to track the companies reshaping the global economy.

Throughout the late 1980s and early 1990s, the index grew steadily as technology companies expanded and new firms joined the exchange. However, the index's most dramatic period was yet to come.

The Dot-Com Bubble: Spectacular Rise and Dramatic Fall

The period between 1995 and 2000 witnessed unprecedented growth in technology stocks, a phenomenon known as the dot-com bubble. During this era, the Nasdaq Composite Index, which encompasses all Nasdaq-listed companies, surged from approximately 1,000 points in 1995 to a peak of 5,132.52 on 10 March 2000. This represented a staggering 582% increase in just five years.

The Nasdaq 100, heavily weighted towards technology stocks, experienced similar explosive growth. Investor enthusiasm for internet-based businesses reached a fever pitch, with companies raising millions through initial public offerings (IPOs) despite having no profits or, in some cases, viable business models.

The euphoria proved unsustainable. When the bubble burst in March 2000, the consequences were severe. Between its peak in March 2000 and its trough in October 2002, the Nasdaq Composite fell approximately 78%, erasing more than $5 trillion in market value. Hundreds of dot-com companies declared bankruptcy, including high-profile failures such as Pets.com, Webvan, and Boo.com.

The crash served as a sobering reminder of market fundamentals, but it also created opportunities for investors. Companies with sound business models survived and thrived, whilst the index gradually recovered throughout the 2000s.

How are Companies Added to the Nasdaq 100?

Unlike some indices that rely solely on market capitalisation, the Nasdaq 100 employs rigorous eligibility criteria to maintain its prestige and ensure liquidity. Companies must satisfy several requirements before consideration for inclusion.

Primary Eligibility Requirements

According to official Nasdaq documentation, companies must:

1. Be listed exclusively on the Nasdaq Stock Market: Dual listings on other primary exchanges disqualify companies.
2. Maintain a security type that qualifies: Acceptable types include common stock, ordinary shares, tracking stocks, shares of beneficial interest, limited partnership interests, or American Depositary Receipts (ADRs) for foreign companies.
3. Operate outside the financial sector: Banks, investment companies, and other financial services firms are excluded.
4. Meet minimum trading volume thresholds: Securities must maintain a three-month average daily trading value of at least $5 million USD.
5. Demonstrate trading history: Companies must have traded on the Nasdaq for at least three months, with exceptions for highly capitalised companies and spinoffs.

Selection and Ranking Process

The index is reconstituted annually each December, with quarterly reviews in March, June, and September. The selection process follows this hierarchy:

• Positions 1-75: Automatically filled by the largest qualifying companies ranked by market capitalisation
• Positions 76-100: Reserved for companies already in the index if they still meet basic requirements
• Replacement candidates: If existing constituents fall below position 100, companies ranked 101-125 may be promoted if they satisfy all eligibility criteria

This methodology provides stability whilst allowing dynamic companies to enter the index as they grow. For instance, Tesla joined the Nasdaq 100 in December 2020 following its surge in market capitalization, while various smaller technology firms have been removed as they fell below the threshold requirements.

Top Nasdaq 100 Companies

The top 10 Nasdaq 100 constituents by market cap reflect the continued dominance of artificial intelligence, cloud computing, and digital platforms:

The index's composition reflects broader market trends, with semiconductor companies gaining prominence due to artificial intelligence demand, whilst traditional software and internet companies maintain substantial weightings.

Nasdaq 100 vs. Nasdaq Composite: Understanding the Difference

Many investors confuse the Nasdaq 100 with the Nasdaq Composite, but these indices serve different purposes:

• Nasdaq 100: Contains only the 100 largest non-financial companies, providing concentrated exposure to major growth stocks
• Nasdaq Composite: Includes over 2,500 companies of all sizes and sectors, offering broader market representation

The Nasdaq 100's exclusion of financial companies and focus on large-cap stocks makes it more volatile but also more concentrated in high-growth sectors. This characteristic has contributed to its outperformance during technology bull markets, whilst increasing downside risk during corrections.

Ways to Access the Nasdaq 100

Investors and traders have multiple avenues to gain exposure to the Nasdaq 100:

Exchange-Traded Funds (ETFs)

The Invesco QQQ Trust (ticker: QQQ) is the most popular ETF tracking the Nasdaq 100, offering straightforward equity exposure through traditional brokerage accounts.

Index Futures

Nasdaq 100 futures contracts (E-mini NQ) trade on the Chicago Mercantile Exchange, providing leveraged exposure and 23-hour trading access.

Contracts for Difference (CFDs)

With Plus500, traders can open positions on the Nasdaq 100 CFD, gaining exposure to all 100 constituent companies through a single instrument. CFD features:

• Leverage: Control larger positions with less capital (but amplifying both gains and losses)
• Short selling: Short selling ais vailable to capture downward movements
• 24/5 trading: Access markets beyond traditional hours
• No ownership complications: Trade price movements without holding underlying securities

For comprehensive guidance on index trading strategies, visit the Plus500 Trading Academy.

The Modern Nasdaq 100: A Global Technology Benchmark

Since recovering from the dot-com crash, the Nasdaq 100 has achieved remarkable performance, driven by the digital transformation of the global economy. The index has weathered multiple challenges, including the 2008 financial crisis, the 2020 pandemic-induced crash, and periodic corrections in the technology sector.

Nasdaq has expanded far beyond its origins, now operating 25 markets worldwide and providing trading technology to exchanges globally. The Nasdaq 100 has become one of the most widely referenced benchmarks, used by professional investors, hedge funds, and retail traders to gauge the health of the technology sector.

The index's evolution reflects the changing leadership in technology. While companies such as Microsoft and Apple have remained dominant for decades, newcomers like Nvidia and Tesla have reshaped the competitive landscape, while former leaders like Intel have seen their influence wane.

Conclusion

From its launch in 1985 with a base value of 125.00 to its current status as a multi-trillion-dollar benchmark, the Nasdaq 100 has chronicled the rise of the technology economy. Its journey through the dot-com bubble, subsequent recovery, and continued dominance illustrates both the opportunities and risks inherent in growth investing.

The index's rigorous listing requirements ensure it maintains high standards, whilst its modified weighting methodology balances concentration with diversification. For traders seeking exposure to the world's leading non-financial companies, the Nasdaq 100 offers a proven vehicle with four decades of history.

Plus500 enables traders to access this prestigious index through the Nasdaq 100 CFD, providing a straightforward method to gain exposure to 100 of today's most innovative companies through a single position. Whether anticipating technology sector growth or seeking to hedge existing positions, the Nasdaq 100 remains a cornerstone instrument in modern trading.

*Past performance does not reflect future results. The above are only projections and should not be taken as investment advice.