The stock market rally this year has been driven mainly by the "Magnificent Seven" stocks. Nvidia (NVDA Quick QuoteNVDA - Free Report) has more than tripled, while Meta (META Quick QuoteMETA - Free Report) and Tesla (TSLA Quick QuoteTSLA - Free Report) have more than doubled year-to-date. The tech-heavy Nasdaq 100 index has surged over 40% this year, leading to these seven stocks accounting for over 55% of the index.

The index includes the 100 largest non-financial companies that trade on the exchange and is tracked by funds with about $300 billion AUM globally, including the ultra-popular Invesco QQQ (QQQ Quick QuoteQQQ - Free Report) and its cheaper alternative, NASDAQ 100 ETF (QQQM Quick QuoteQQQM - Free Report) .

The benchmark follows a modified market capitalization-weighted methodology. According to the index rules, constituents with weights exceeding 4.5% collectively cannot account for more than 48% of the index.

In the event these limits are exceeded, the index undergoes a Special Rebalance. The third Special Rebalance took effect before the market opened on July 24th. The previous two rebalances were carried out in 1998 and 2011.

As a result of the Special Rebalance, the combined weight of the seven biggest stocks was reduced to about 43% from over 55%. Microsoft (MSFT Quick QuoteMSFT - Free Report) and Nvidia experienced the most significant cuts, each down about 3%, while Apple (AAPL Quick QuoteAAPL - Free Report) regained the top spot with a relatively small decrease of 1%. Broadcom (AVGO Quick QuoteAVGO - Free Report) saw the biggest increase in weighting, rising from 2.5% to 3.1%.

To learn more, please watch the short video above.