Index funds follow indices and to follow an index asset manager holds a weighted basket of respective stocks. If stock is excluded from the index, asset manager sell it off and that puts downward pressure on the stock price. Reverse happens if stock is included into the index.
That’s what common sense makes you think, reality is big money needs someone to sell into their NVDA stock and this is how they do it.
Just look at what happens to the stocks every time they get added or removed from the index, the complete opposite of common sense.
Liquidity is held by funds. Funds (some of them pensions) have rules where to allocate. They just follow these rules and allocate. Now this change will change the allocation to Nvidia. Investors can tap into this liquidity. The $$$ are then transferred from the funds (some of them are pensions, uh I mentioned that) to the investors.
AI bubble then burst. Funds are “adjusted” and someone is not getting his pension.