You can put it on the calendar: July 7 and SpaceX enters the Nasdaq 100. That in itself should be enough to make the stock move. JPMorgan figures that index huggers like QQQ and QQQM will have to put in for the rocket and AI maker, with as much as $4.3 billion in new money. Nasdaq made it official on Friday.
There are those who don’t see it the same way. “You can see the demand, which is why they put the fast track on it,” says Michael Field, the top equity market strategist at Morningstar. “Some will be pleased. I’d say the skeptics, us included, not so much. In our view, the valuation is too high.”
Why you see the buying when a name is in
It’s a no-brainer for the funds. If you’re tracking the Nasdaq 100, you buy what’s new to stay in line, and that tends to underpin the price come the effective date. You can see it in the short term if there isn’t much liquidity or the mood is right.
Most of the time, if you want some tech in your portfolio you go with an ETF or a mutual fund tied to the index. Invesco’s QQQ and QQQM are two of the big ones, and their activity can set the tone in the days after a new name is in. As a rule, the stock goes up as the funds put in their orders.
How the rules were changed to let them in
SpaceX has had a quick run to the Nasdaq 100 because the index makers have been more open about who gets in. Nasdaq, FTSE Russell and MSCI have all let up on the fine print – profitability, how long since you’ve been public, the float – in an effort to draw in more US names.
Even with a checkered past when it comes to the bottom line. Since coming to the Nasdaq on June 12, we’ve seen everything from heavy losses to a modest profit over the last three years. A year ago, for instance, the company was down $4.9 billion in net terms.
What it means for the next batch of AI
This is also a sign of times for the high-flying, AI-centric firms that are looking to go public. OpenAI and Anthropic, for one, are thought to be in line for an IPO this year or the next, with price tags well over a trillion in mind.
If the market is keen to own these kinds of growth stories via an index, you’ll see the liquidity pool up in the benchmarks. It’s a good thing for the ones that get in early; the rest are left to fend for themselves outside the main passive flows.
For the time being, the S&P 500 is a no-go
S&P Global is holding the line. They told us this month they aren’t budge on the standards for SpaceX to be in any of their key indices, the S&P 500 among them. They’ll wait a full 12 months before they even give it a look. Different story, different bar.
In plain terms, the heft of the passive bid in US equities is still off the table. The Nasdaq 100 is one thing, but an S&P 500 listing has a way of pulling in a wider audience from the core index funds.
Here’s what you need to know:
– July 7: SpaceX is in the Nasdaq 100
– $4.3 billion in passive money, per JPMorgan
– Invesco’s QQQ and QQQM will be adding to their positions
– A $4.9 billion net loss on the books last year
– 12-month minimum before the S&P 500 is in the picture
The question now is how much of that buying actually shows up and how well it is taken in. With the rules and the ETFs in play, July 7 is the day to see where the price is and what investors are willing to put on Musk’s handiwork in the index era.
