If you want to invest in big US companies, you’ll often hear about the S&P 500 Index or the Nasdaq-100 Index. They’re both stock market indexes that track groups of major American businesses, and they’re closely linked¹. In fact, about 85% of Nasdaq-100 companies are also part of the S&P 500 Index¹.
But they’re not the same. The Nasdaq-100 Index is more focused on fast-growing industries and companies known for innovation. For investors, this means greater exposure to firms shaping the future.
How the Nasdaq-100 Index became the home of innovation
The Nasdaq Stock Market started in 1971 as the world’s first electronic stock exchange. This made it the natural home for companies that wanted to change the way business was done.
The Nasdaq-100 Index has typically been seen as the ‘technology index’. And while it still attracts many technology companies, it also includes companies in other high-growth areas.
In the Nasdaq-100 Index, about 85% of the companies are in Information Technology, communication, consumer discretionary (non-essential goods and services like holidays or streaming), and healthcare. In the S&P 500 Index, these same sectors make up only 62% of the index². This shows the Nasdaq-100 Index’s strong focus on innovation.
The index also includes companies in more everyday sectors such as consumer staples (food and essential household goods), but does not include financial companies.
Is there a link between innovation and growth?
Innovation can help companies grow, but the results aren’t instant. Turning new ideas into profit takes time and costs money.
In recent years, firms announcing bold plans around artificial intelligence (AI) often saw their share prices rise, and companies seen as slow to adopt AI sometimes faced criticism.
But excitement can fade if costs rise and results are slow. That’s why lasting innovation comes from companies that make it part of their culture, not just a short-term project.
R&D: showing commitment
One way to measure innovation is by looking at research and development (R&D). This shows how much money a company puts into creating new products and services.
Nasdaq-100 companies spend more on R&D than those in the S&P 500 Index. At the end of March 2024, Nasdaq-100 companies spent about 11.7% of their sales on R&D, compared with 8.7% for the S&P 500 Index overall³.
If you remove Nasdaq-100 Index companies from the S&P 500 Index, the rest spent only 1.8%. This shows how central innovation is to companies in the Nasdaq-100 Index³.
It’s not just technology
While technology companies are obviously driving innovation (think self-driving cars, AI), other industries have also invested in R&D to drive growth.
For example, food and drink companies are using drones to check crops, plant-based recipes to replace dairy, and even 3D printing to design recyclable bottles.
Patents: proof of new ideas
Patents protect a unique invention, and show that a company has created something original.
Fifty-eight Nasdaq-100 Index companies, making up over 80% of the index by value, have filed patents in areas like AI, clean energy, and blockchain. In total, Nasdaq-100 Index companies hold patents across 35 disruptive technologies⁴.
Some of these ideas may drive profits now, while others may take years. But all show a clear commitment to innovation.
Why the Nasdaq-100 Index matters today
Markets are always changing, but innovation is a constant theme. Companies that invest in new and better products often build stronger futures.
Nasdaq-100 Index’s focus on innovation-driven businesses means it gives investors more direct exposure to potential growth than broader indices such as the S&P 500 Index.
How to invest in Nasdaq-100 indices
Invesco offers one of the largest ranges of Nasdaq-100 ETFs in Europe. ETFs (exchange-traded funds) let you invest in a group of companies without buying shares in each one directly.
- Invesco EQQQ Nasdaq-100 UCITS ETF – our flagship fund, with around US$11 billion invested⁵.
- Invesco Nasdaq-100 Equal Weight UCITS ETF – reduces the dominance of the very largest firms by giving each company equal weight.
- Invesco Nasdaq Next Generation 100 UCITS ETF – tracks the 100 companies just below the Nasdaq-100. These could be the market leaders of tomorrow.
An investment in this fund is an acquisition of units in a passively managed, index tracking fund rather than in the underlying assets owned by the fund.
FAQs
1. What is the main difference between the Nasdaq-100 Index and the S&P 500 Index? The Nasdaq-100 Index focuses on 100 of the largest non-financial companies listed on the Nasdaq Stock Exchange, with a strong tilt towards technology and innovation. The S&P 500 Index includes 500 of the largest US companies across all sectors, offering broader market exposure.
2. Why is the Nasdaq-100 Index often called a “technology index”? Around 85% of Nasdaq-100 companies operate in technology-driven industries like information technology, communication, consumer discretionary, and healthcare. This makes it far more concentrated in innovation than the S&P 500 Index.
3. Are companies in the Nasdaq-100 Index also part of the S&P 500 Index? Yes. About 85% of Nasdaq-100 Index companies are also included in the S&P 500 Index. However, the weighting of sectors and the absence of financial companies make the Nasdaq-100 Index stand out.
4. Which index offers greater exposure to innovation? The Nasdaq-100 Index. Its companies typically invest more in research and development (R&D), spend more on patents, and operate in sectors that drive future growth, such as AI and clean energy.
5. What role does R&D spending play in the Nasdaq-100 Index? Nasdaq-100 companies spend a higher share of sales on R&D (about 11.7%) than companies in the S&P 500 Index (8.7%). This highlights their focus on creating new products and long-term growth.
6. Do Nasdaq-100 companies only come from the technology sector? No. While technology is a big focus, Nasdaq-100 companies also include those in healthcare, consumer goods, and other innovative industries. What they share is a strong commitment to growth and new ideas.
7. How can UK investors access the Nasdaq-100 Index? UK investors can buy exchange-traded funds (ETFs) that track the Nasdaq-100 Index. Examples include the Invesco EQQQ Nasdaq-100 UCITS ETF and the Invesco Nasdaq-100 Equal Weight UCITS ETF, available via platforms like InvestEngine.
8. Is the Nasdaq-100 Index better for long-term growth than the S&P 500 Index? The Nasdaq-100 Index offers higher exposure to innovative sectors that may drive future growth. However, the S&P 500 Index provides broader diversification. Which is “better” depends on an investor’s risk tolerance and goals.
9. What risks should I be aware of when investing in Nasdaq-100 ETFs? Like all investments, Nasdaq-100 ETFs carry risks. These include market volatility, sector concentration, and potential losses. The value of investments can go down as well as up, and you may not get back the full amount invested.
This content is part of a paid partnership with Invesco. It is for educational purposes only, does not constitute investment advice and may not be suitable for all audiences. Capital at risk. The value of your portfolio with InvestEngine can go down as well as up. You may get back less than you invest. ETF costs also apply. This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance. Tax treatment depends on personal circumstances and is subject to change. Past performance is not a reliable indicator of future returns.
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Data as at 24 October 2025 unless otherwise stated. This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.
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EMEA4935061/2025
¹ Source: Nasdaq Index Research Team, 93% correlation of daily returns from 31 Dec 2007 to 28 Mar 2024
² Source: Invesco, Bloomberg, as of 18 Sep 2024
³ Source: Nasdaq Global Indexes, FactSet, as of 31 March 2024
⁴ Source: Nasdaq. Patent data as of 30 November 2023. Index data as of 29 November 2023. Most current data available.
⁵ Source: Bloomberg, as of 19 Sep 2024