The Nasdaq-100: More than meets the eye

A person peering through binoculars represents an investor viewing the diversification within the companies that make up the Nasdaq-100 index.

It’s likely that some investors may think of the Nasdaq-100 Index, which the Invesco QQQ ETF tracks, as a way to gain exposure to the technology sector. But in reality, there’s a lot more diversification within the 100 innovative companies in the index than you might expect.

This diversification comes in many shapes, spanning industry sectors, geographies, and even the underlying business segments of technology companies. Below, we delve into the characteristics of the Nasdaq-100 and offer up some in-depth (and likely unexpected) insights into three of the most famous companies in the world.

Sector diversification

By definition, the Nasdaq-100 includes the 100 largest non-financial companies in the Nasdaq Composite Index. It might surprise some investors to find that barely 50% of Nasdaq-100 companies are in the information technology sector, with the rest divided among communication services, consumer discretionary, health care, industrials and even a few utilities.

Nasdaq-100 Index sector allocations by market capitalization

As of January 31, 2023. Sector allocations are subject to change.

The 10 largest Nasdaq-100 companies comprise more than 48% of the index’s market capitalization.1 These companies span multiple sectors, with information technology representing about 55% of the top-10 market cap and the rest allocated across communication services and consumer discretionary stocks.

Looking under the hood: Apple, Amazon and Alphabet

The Nasdaq-100’s largest components include global industry leaders that have been building and broadening their portfolios of products and services for many years. Our sampling below highlights the diversification characteristics of one company from each of the three top-10 sectors — information technology, consumer discretionary, and communications services — based on their revenue sources and geographies.


Apple: Information Technology
  • Business summary: Apple designs, manufactures, and markets smartphones, personal computers, tablets, wearables and accessories. Apple also offers a growing range of related services.
  • Revenue breakdown: Products (79%), Services (21%).
  • International diversification: Americas (43%), International (57%).
  • Diversification highlights: Acquisitions over the past few years have tended to be in smaller companies—and not necessarily reported publicly. Apple has invested significantly in financial services (mobile Apple Pay wallet and Apple Card). Two known acquisitions in 2022 have included UK-based companies Credit Kudos (technology for calculating credit scores) and AI Music (using artificial intelligence to generate customized music).
Amazon: Consumer Discretionary
  • Business summary: Amazon has grown to become the second-largest retailer in the world. Amazon Web Services (AWS) is by far the largest cloud services provider. Amazon also produces broad entertainment content, from movies to music.
  • Revenue breakdown: Retail Revenue (80%), Amazon Web Services (15%), Advertising Services (5%)
  • International diversification: North America (60%), International (27%), Other (13%)*
  • Diversification highlights: Familiar brands under the Amazon umbrella include Ring, Whole Foods and MGM Studios. In recent months, the company has made high-profile bids to buy iRobot, the leading robot-vacuum brand, and One Medical, a healthcare tech company that deepens Amazon's reach into the healthcare sector.

Alphabet: Communication Services
  • Business summary: Alphabet Inc. is a holding company with three primary segments: Google Services, Google Cloud and Other Bets (mostly earlier-stage companies that are further afield from Google’s legacy businesses).
  • Revenue breakdown: Google Services (92%), Google Cloud (7%), Other Bets (1%)
  • International diversification: Americas (51%), International (49%)
  • Diversification highlights: Alphabet is home to Google Ventures, an $8 billion venture capital firm overseeing investments in 400 active companies including self-driving cars (Waymo), drone deliveries (Wing) and smart home products (Nest). Of Alphabet’s health care projects, the company is most notably leveraging its DeepMind AI research for an array of diagnostic initiatives.

    * “Other” includes non-defined regions and Amazon Web Services. Amazon uses these segments to categorize revenues. All data comes from company 10-K reports.

    Source: 2021 Company Annual Reports (10-Ks).²

While the above companies are engaged in a diverse set of businesses, they all share one aspect of their diversification strategies: investments in cutting-edge innovation that are poised to redefine how historically core industry sectors—e.g., finance, health care, manufacturing and transportation—conduct business. The table below highlights investments in research & development, products and services at the forefront of these advances.

Industry Leaders Chart

Source: 2021 Company Annual Reports (10-Ks).

Three takeaways for long-term investors
  1. For long-term investors, diversification can be a key component of success. We believe Invesco QQQ can provide diversification on many levels based on industry composition and sources of revenues of the holdings.
  2. Many Nasdaq-100 companies have made strategic investments in areas of cutting-edge innovation—wearable technologies, satellites, autonomous vehicles, streaming video games, robotics, quantum computing, and augmented & virtual reality, to name a few. Diversifying into these sectors not only broadens company revenue streams, but also migrates those revenue streams towards the next generation of traditional industry groups—like financials, healthcare, industrials and transportation. 
  3. International diversification should be considered as part of a long-term investor’s strategic asset allocation, regardless of whether we see headwinds or tailwinds from the near-term macro backdrop. Investing in global companies domiciled in the U.S. can be an effective way to add international diversification, while potentially benefiting from the transparency and corporate governance standards available under U.S. regulatory guidelines. It’s no accident that the 10 largest components of the Nasdaq-100 (nearly half of the index’s market capitalization) are global leaders with significant revenues from outside the U.S. 


  • 1

    Market capitalization is the total value of all a company's shares of stock. It is calculated by multiplying the price of a stock by its total number of outstanding shares.

  • 2

    A 10-K is a comprehensive financial performance report required to be filed annually by publicly traded companies.

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