SpaceX to Join Nasdaq 100 Index, Attracting Billions in Passive Investment
Quick Look
- SpaceX will be added to the Nasdaq 100 index on July 7, potentially attracting billions in passive investment.
- This inclusion follows Nasdaq's relaxed entry criteria, despite SpaceX's recent net loss of $4.9 billion.
- While some see high demand, others, like Morningstar, view the stock as overvalued.
AI-generated summary
Why It Matters
SpaceX is set to be added to the Nasdaq 100 index, a move that typically boosts stock prices due to increased demand from index-tracking funds. Nasdaq has recently relaxed its entry requirements.
SpaceX will be added to the tech-heavy Nasdaq 100 index on July 7, exchange operator Nasdaq confirmed on Friday, paving the way for a surge in passive investments in Elon Musk's rocket and AI giant.
Inclusion in the index typically boosts the stock price, as exchange-traded funds looking to replicate the index's performance buy shares of the newly included firm.
To make it more attractive for companies seeking U.S. listings, Nasdaq, along with other index providers FTSE Russell and MSCI, relaxed its entry requirements including profitability, the number of days after a company goes public and the number of shares available for trading.
SpaceX, which made its Nasdaq debut on June 12, has swung between sharp losses and small profits over the past three years. Last year, the company reported a net loss of $4.9 billion.
Large Language Model (LLM) makers OpenAI and Anthropic are also expected to file for their initial public offerings this year or next year and likely target valuations of more than $1 trillion.
Investors buy mutual funds and ETFs, such as Invesco's QQQ and QQQM, that track the Nasdaq 100, to get broader exposure.
J.P. Morgan estimated that SpaceX's inclusion in the Nasdaq 100 could draw $4.3 billion in passive inflows.
"Clearly, there's a lot of demand, that's why they fast-tracked the integration into the index," Michael Field, chief equity market strategist at Morningstar, said. "A lot of people will be happy with it. Some fund managers less so, the skeptics amongst them, us included. We think the stock is overvalued."
S&P Global said this month that it was not changing the requirements for SpaceX to enter its major indices, including Wall Street's benchmark S&P 500 index, and will wait for at least 12 months before even considering it.
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What to Watch
AI outlook — possibilities, not facts
SpaceX inclusion to attract $4.3 billion in passive inflows.
Likely · Short term
Open Questions
- Will SpaceX's stock price sustain its gains post-inclusion?
- How will OpenAI and Anthropic's potential IPOs impact the market?
