The Nasdaq Composite is a stock market index that serves as a key benchmark for the performance of nearly all equity securities listed on the Nasdaq stock exchange in the United States. It is a capitalization-weighted index, meaning the companies with the largest market value have the greatest influence on the index's overall movement.
The index was launched on February 5, 1971, alongside the Nasdaq stock exchange itself, which was created to modernize the stock market by becoming the world's first fully electronic stock market. This solved the problem of slow, confusing, and less transparent trading that relied on in-person or phone-based transactions. The index began with a base value of 100.
The Nasdaq Composite works by tracking the stock performance of over 3,000 securities, including common stocks, American Depositary Receipts (ADRs), and Real Estate Investment Trusts (REITs), but it excludes closed-end funds, Exchange-Traded Funds (ETFs), and preferred stocks. Its value is calculated by summing the market capitalization of all its components and dividing that sum by a divisor to normalize the scale. Because of the types of companies that list on the exchange, the index is heavily weighted toward the information technology sector, which often accounts for a majority of its composition.
An informed reader should know that the Nasdaq Composite is one of the three most-followed stock market indices in the U.S., alongside the Dow Jones Industrial Average and the S&P 500. It is closely connected to the Nasdaq-100, a smaller, more selective index launched in 1985 that tracks the 100 largest non-financial companies within the Composite.
The index's methodology is subject to daily maintenance, with eligible securities added and ineligible securities removed each day. A recent change in methodology, effective May 1, 2026, was approved by Nasdaq Global Indexes to update the rules for the related Nasdaq-100 Index, though the core capitalization-weighted mechanism of the Composite remains the same. Additionally, new rules have been introduced to fast-track the inclusion of major Initial Public Offerings (IPOs) into Nasdaq indexes, which could affect the Composite's composition more rapidly than in the past.