In the last decade, U.S. equity markets have been dominated by technology giants. However, there are substantial differences in the composition of the S&P 500 and NASDAQ 100 indices—differences that have a direct impact on market performance, risk dynamics, and the profile of investors attracted to each index. In a rapidly evolving environment where tech, industry, and finance intersect, understanding the construction of these indices is crucial for both institutional and retail investors.

The S&P 500: Broad Diversification Led by Tech Giants

The S&P 500 represents a wide sample of the 500 largest and most influential companies in the United States, serving as the best proxy for the overall U.S. economy. However, as the chart illustrates, the majority of the index’s weight is concentrated in a handful of mega-cap tech names. Nvidia (NVDA) and Microsoft (MSFT) lead the index with a weight of 6.8% each, followed by Apple (AAPL) at 6%. Amazon (AMZN), Meta Platforms (META), Broadcom (AVGO), Alphabet (GOOGL, GOOG), Tesla (TSLA), Berkshire Hathaway (BRK.B), and JPMorgan Chase (JPM) round out the top holdings, each ranging from 1.5% to 3.8%.

It is important to highlight that the “Other” category accounts for a substantial 54.1% of the index, reflecting the S&P 500’s broad exposure to financials, healthcare, industrials, and consumer sectors. This wide diversification acts as a stabilizer, especially during periods of increased market volatility.

The NASDAQ 100: Technology and Growth in the Spotlight

In contrast, the NASDAQ 100 is composed of the 100 largest non-financial companies listed on the NASDAQ exchange, with a clear emphasis on technology and growth-oriented stocks. The index is overwhelmingly concentrated in tech and internet companies, both by number and by total weight. The three largest holdings—Nvidia (NVDA), Microsoft (MSFT), and Apple (AAPL)—each command 8.6% of the index. They are followed by Amazon (AMZN) at 5.5%, Broadcom (AVGO) at 5%, Meta (META), Netflix (NFLX), Tesla (TSLA), Costco (COST), and Alphabet (GOOGL/GOOG), all with weights between 1.7% and 3.7%.

Compared to the S&P 500, the “Other” category in the NASDAQ 100 makes up only 34.7% of the index—a testament to the high concentration and the outsized influence of its largest constituents.

Key Differences: Diversification Versus Concentration

The first critical difference is the level of diversification. The S&P 500 offers much broader sectoral exposure, while the NASDAQ 100 is heavily skewed toward technology, internet, and consumer growth stocks. As a result, S&P 500 investors benefit from exposure to traditional sectors (such as finance, healthcare, and industrials) that provide stability and help cushion the impact of volatility in technology. In contrast, NASDAQ 100 investors ride the momentum of rapid tech innovation and growth, but are also more exposed to sector-specific risks and sharp corrections.

Another major difference is in the concentration of index weightings. In the S&P 500, the top ten holdings comprise less than 40% of the index, while in the NASDAQ 100, the top ten stocks account for more than 50%. This means that any sharp move in Apple, Microsoft, or Nvidia can significantly sway the entire NASDAQ 100 index.

Which Companies Are Unique to Each Index?

The S&P 500 includes major financial names like JPMorgan Chase (JPM), Procter & Gamble (PG), and Berkshire Hathaway (BRK.B)—none of which are present in the NASDAQ 100. Conversely, the NASDAQ 100 features key technology and internet companies such as Netflix (NFLX), Palantir (PLTR), Intuit (INTU), Booking Holdings (BKNG), PepsiCo (PEP), and others, which either have little representation in the S&P 500 or are absent entirely.

Impact on Index Performance

Sector composition has a significant impact on index performance. The NASDAQ 100 typically outperforms during periods of tech sector strength but also suffers larger drawdowns during tech sell-offs. The S&P 500, by contrast, is seen as a more “balanced” and stable index, suitable for investors seeking broad exposure to the entire U.S. economy and less vulnerability to a single sector.

In recent years, the explosive growth of stocks like Nvidia, Microsoft, and Apple has propelled both indices to record highs. However, the NASDAQ 100’s dependency on these companies is much higher. For instance, Nvidia makes up 8.6% of the NASDAQ 100 versus 6.8% in the S&P 500. The pattern is similar with Apple and Microsoft, both having larger weights in the NASDAQ 100 than in the S&P 500.

Looking Ahead: Risks and Opportunities

When investing in indices, it is critical to understand their structural composition. Indices are not just “generic baskets” of the U.S. economy but have unique risk and return characteristics. Investors seeking higher returns (and higher volatility) may gravitate toward the NASDAQ 100, leveraging its focus on innovation and growth. Those preferring broader diversification and relative stability are likely to favor the S&P 500.

Conclusion: Which Index Is Right for You?

Choosing between the S&P 500 and the NASDAQ 100 comes down to your individual risk tolerance, investment horizon, and need for diversification. These indices are not interchangeable, and each exposes investors to different potential scenarios in terms of both reward and risk. The charts make it clear: while both indices are powered by the world’s largest tech companies, the NASDAQ 100 is defined by tech dominance, whereas the S&P 500 still gives significant weight to traditional sectors, balancing volatility with broader exposure.