Livin’ on the Edge: How U100 Captures Innovation Across Markets

Innovation is not just a driver of progress; it’s a competitive edge in today’s fast-changing world. When the U100 index methodology was updated on 20 September 2024, the aim was simple – to better reflect transformative innovation while delivering measurable performance. A 70-basis point outperformance versus the Nasdaq 100 Index since the index methodology change may not seem seismic, but it highlights how strategic diversification and a focus on true innovators can potentially yield meaningful results.1

Key Takeaways

  • Expanded scope: The U100 methodology captures innovation across sectors and exchanges. Five of the top 10 performers since the methodology change are non-Nasdaq components, highlighting the fund’s ability to uncover hidden value.
  • Performance gains: Since the methodology change, the fund has outperformed the Nasdaq 100 Index by roughly 70 basis points, reflecting the success of its broadened approach.
  • Diverse contributors: Key names like Salesforce, TSMC, and ServiceNow showcase the methodology’s strength in identifying high-growth opportunities across industries, while maintaining alignment with Nasdaq’s core technology focus.

How the U100 Index Methodology Delivers Results

The revised methodology broadened U100’s scope to include companies listed on both the Nasdaq and the NYSE, recognising that innovation transcends traditional boundaries. By refining sector exposures and focusing on industries such as semiconductors, software, and communications, the index methodology aims to capture emerging trends. This broader perspective has enabled the inclusion of high-growth innovators like Salesforce and TSMC, whose contributions to technological advancement demonstrate the value of looking beyond Nasdaq listings. While U100’s methodology has broadened its scope to include innovative companies beyond Nasdaq, the fund continues to reflect Nasdaq’s core strengths and its alignment with high-growth technology sectors.

Top Contributors to Outperformance

Since the methodology change, several companies have stood out as key drivers of U100’s performance. These names not only embody the fund’s ethos but also illustrate the broader value of a diversified approach:

  • Salesforce: As a global leader in customer relationship management and enterprise solutions, Salesforce continues to redefine the industry with its AI-driven Agentforce platform. By seamlessly integrating AI to enhance productivity and efficiency, Salesforce has capitalised on its strong enterprise adoption rates. This strategic focus on innovation and market leadership has driven impressive revenue growth, cementing its position as a key contributor to U100’s performance. The shares contributed to 0.8% performance to U100 since the methodology change.
  • TSMC: Taiwan Semiconductor Manufacturing Company (TSMC) remains a pivotal player in the global semiconductor industry, leveraging its technological leadership to meet surging AI demand. Recent advancements, such as the N3 process for GPUs and expanded CoWoS packaging, have bolstered its position as the preferred supplier for cutting-edge AI workloads. A projected 20-25% YoY revenue growth and strategic collaborations with major customers like Nvidia highlight TSMC’s ability to navigate geopolitical challenges while delivering robust performance. The shares contributed to 0.5% performance to U100 since the methodology change.
  • ServiceNow: A leader in enterprise workflow automation, ServiceNow has shown resilience through its core platform’s adoption and its innovative use of generative AI tools. Features like the Now Platform and AI-driven solutions have enhanced operational efficiency for clients across industries, driving higher-than-expected client retention and revenue. The company’s focus on leveraging generative AI to tap into a broader market underscores its transformative impact and growth potential. The shares contributed to 0.4% performance to U100 since the methodology change.

These contributors underscore the effectiveness of the U100 methodology in identifying companies that drive transformative growth across sectors and exchanges.

Why Non-Nasdaq Names Matter

The U100 methodology’s broader scope highlights a critical insight: innovation thrives beyond Nasdaq. Companies like TSMC and ServiceNow underscore the importance of including non-Nasdaq-listed names to fully capture technological advancements. Five of the top 10 performers since the methodology change are non-Nasdaq components, reflecting the fund’s capacity to uncover high-value opportunities that might otherwise be overlooked. This approach ensures the fund aligns with trends in both traditional tech and the broader dynamism of innovation across exchanges.

Beyond Numbers: Positioning for Long-Term Growth

The fund’s outperformance illustrates its mission of capturing innovation wherever it occurs. As sectors such as AI, automation, and semiconductors continue to gain momentum, the U100 methodology positions investors to benefit from wider range of companies driving these shifts. By maintaining a forward-looking approach, the fund serves as a benchmark for investors seeking exposure to transformative themes and long-term growth.

Implications for Investors

The U100’s outperformance of the Nasdaq 100 Index reinforces the importance of a diversified, innovation-led strategy. By looking beyond Nasdaq-listed names and embracing transformative companies across sectors, the fund offers a unique opportunity for investors to align with future growth. The key takeaway: innovation knows no boundaries, and a forward-thinking approach is essential to staying ahead in an evolving market.

Related Funds

U100: The Global X US 100 ETF (ASX: U100) invests in 100 of the largest innovative companies listed on the US market on either the NASDAQ or NYSE. It focuses on technology and pioneering US companies, providing investors to sectors with higher potential growth.