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Analyzing Technology-Related Equities’ Contribution to 2023 U.S. Equity Returns


July 2023

Dwijen Gandhi Headshot
Dwijen Gandhi

Senior Director, Equity Index Research and Development

U.S. large cap equities exhibited strong performance during the first half of 2023. The ICE U.S. 500 Index (ICEUST5) which measures the performance of the top 500 U.S. listed companies as ranked by unadjusted market capitalization, returned 17.26% in the first half of the year1. By contrast, the ICE U.S. Small-Mid 2500 Index (ICEUS25K), representing small and mid-cap U.S. equities, returned a more modest 9.01% during the same period. Clearly, the securities of larger U.S. companies have been outperforming smaller ones - but why?

Part of the answer lies in the fact that dispersion in performance was not limited to size. To set the stage, sector weights2 were quite different when comparing the ICEUST5 and ICEUS25K indices at the end of last year:

Sector (12/30/2022)ICEUST5 Large CapICEUS25K Small/Mid CapICEUST5 Over/Underweight
Consumer Discretionary10.11%11.57%-1.46%
Media & Communications7.33%2.75%4.59%
Consumer Staples6.64%3.79%2.85%
Real Estate & REITs2.88%7.12%-4.24%

The larger market capitalization constituents of the ICEUST5 were generally overweight in the tech-related Technology and Media & Communications sectors. That said, the tech-related Consumer Discretionary sector was also notably slightly underweight in the large cap ICEUST5 compared to the small/mid cap ICEUS25K. Nevertheless, when analyzing the more granular tech-related Online & Direct Retail sub-industry within that sector, the same tech-related overweighting is evident at the end of 2022:

Sub-Industry (12/30/2022)ICEUST5ICEUS25KICEUST5 Over/Underweight
Online & Direct Retail2.43%0.17%2.26%

As we headed into 2023, the larger cap ICEUST5 index was clearly tilted toward tech-related companies. How did that evolve during the first half? It was clear that the sector performed relatively well when analyzing sector weight differences between the start and end of the six-month period:

Consumer Discretionary10.11%11.26%1.15%
Media & Communications7.33%8.37%1.04%
Consumer Staples6.64%5.73%-0.91%
Real Estate & REITs2.88%2.49%-0.39%

The three tech-related sectors all had significant sector weight increases, with the Technology sector leading the way, rising by 5.51% to 28.03% during the first half.

This is further evidenced when looking at the performance of the individual ICE U.S. 500 uncapped sector indices during that period:

TickerNameH1 2023 Return
ICE5TCICE U.S. 500 Technology Sector Index47.16%
ICE5MCICE U.S. 500 Media and Communications Sector Index35.95%
ICE5CDICE U.S. 500 Consumer Discretionary Sector Index30.32%
ICE5INICE U.S. 500 Industrials Sector Index10.12%
ICE5MTICE U.S. 500 Materials Sector Index7.79%
ICE5FNICE U.S. 500 Financials Sector Index2.47%
ICE5REICE U.S. 500 Real Estate and REITs Sector Index2.44%
ICE5CSICE U.S. 500 Consumer Staples Sector Index1.75%
ICE5HCICE U.S. 500 Healthcare Sector Index-1.34%
ICE5ENICE U.S. 500 Energy Sector Index-5.61%
ICE5UTICE U.S. 500 Utilities Sector Index-7.02%

Dissecting the ICEUST5 returns further, we can derive the constituents with the top positive contributions to index return. This is calculated from the total return of the individual securities being combined with their weight in the index:

RankTickerNameAverage WeightICEUST5 ContributionCumulative ContributionSectorNYFANG
1AAPLApple Inc.7.28%3.17%3.17%TechnologyX
2MSFTMicrosoft Corporation5.96%2.36%5.53%TechnologyX
3NVDANVIDIA Corporation1.83%2.06%7.59%TechnologyX, Inc.2.69%1.33%8.92%Consumer DiscretionaryX
5METAMeta Platforms Inc. Class A1.31%1.17%10.09%Media & CommunicationsX
6TSLATesla, Inc.1.43%1.12%11.21%Consumer DiscretionaryX
7GOOGLAlphabet Inc. Class A1.79%0.62%11.83%Media & CommunicationsX
8GOOGAlphabet Inc. Class C1.58%0.56%12.39%Media & CommunicationsX*
9AVGOBroadcom Inc.0.77%0.40%12.78%Technology
10LLYEli Lilly and Company0.93%0.26%13.04%Healthcare
11AMDAdvanced Micro Devices, Inc.0.42%0.26%13.31%TechnologyX
12CRMSalesforce, Inc.0.51%0.26%13.56%Technology
13ADBEAdobe Incorporated0.50%0.21%13.77%Technology
14NFLXNetflix, Inc0.44%0.20%13.97%Media & CommunicationsX
15ORCLOracle Corporation0.42%0.18%14.15%Technology
16VVisa Inc. Class A1.05%0.16%14.31%Financials
17GEGeneral Electric Company0.29%0.16%14.47%Industrials
18AMATApplied Materials, Inc.0.29%0.13%14.60%Technology
19MAMastercard Incorporated Class A0.90%0.13%14.72%Financials
20BRK.BBerkshire Hathaway Inc. Class B1.18%0.12%14.85%Financials

* Alternate share class of issuer included in the NYFANG index

As the above table demonstrates, a large part of the 17.26% first-half ICEUST5 index return was derived from the top three (7.59%), top five (10.09%) and top 10 (13.04%) contributors to return. It further shows that the top 20 positive contributors to the ICEUST5 return during the first half were mostly sourced from tech-related sectors. In fact, the top eight positive contributors to the index return, as well as 10 of the top 14 contributors, were all securities issued by companies also contained in the tech-focused NYSE FANG+® Index (NYFANG).

NYFANG, an equal-weighted equity benchmark designed to track the performance of 10 highly-traded growth stocks of technology and tech-enabled companies in the technology, media & communications and consumer discretionary sectors, had a positive return of over 74% in the first half alone. While the performance dispersion of NYFANG was lower (i.e., more even) than ICEUST5, there were two securities with outsized positive performance contributions to the index year-to-date in 2023 - NVIDIA Corp. (NVDA) and Meta Platforms Inc. (META).

TickerNameAverage WeightNYFANG Contribution
NVDANVIDIA Corporation10.82%15.64%
METAMeta Platforms Inc. Class A11.20%13.58%
TSLATesla, Inc.9.57%8.61%
AMDAdvanced Micro Devices, Inc.10.07%8.54%, Inc.9.88%6.31%
NFLXNetflix, Inc.9.93%5.56%
AAPLApple Inc.9.61%5.09%
MSFTMicrosoft Corporation9.61%4.36%
GOOGLAlphabet Inc. Class A9.77%4.36%
SNOWSnowflake, Inc. Class A9.54%2.52%

To recap, the performance of U.S. equities has been led by large cap equities during the first half of 2023. This has been largely attributed to the high starting exposure to technology and tech-related sectors, which only rose throughout the first two quarters as the rally in technology picked up. In addition, the main drivers of return for U.S. large cap equity indices like the ICE U.S. 500 have been concentrated in a handful of companies. Indices like the NYSE FANG+ Index have a focused exposure to many of these names, which has led to even more robust returns so far in 2023.3

1All performance figures in this article are represented in USD gross total return terms as of June 30, 2023.

2All sector classifications in this article are sourced from the ICE Uniform Sector Classification schema.

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  • U.S. large cap equities (ICE U.S. 500 Index) outperformed small and mid-caps (ICE U.S. Small-Mid 2500 Index) in the first half, driven by strong performance in tech-related sectors.
  • The weighting of the tech sector grew by 5.51% in the ICE U.S. 500 Index in the six months to the end of June, with the top positive contributors to performance being Apple, Microsoft and NVIDIA.
  • The main drivers of 2023 return for U.S. large cap equity indices like the ICE U.S. 500 have been concentrated in a handful of companies.