By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panelists agree that the S&P's 12-month seasoning rule will lead to a significant divergence in passive flows, with Nasdaq-100 and other tech-heavy ETFs benefiting from the inclusion of megacaps like SpaceX, Anthropic, and OpenAI before they enter the S&P 500. However, they also warn about potential risks such as concentration, liquidity, and valuation issues that could arise from these IPOs.
Risk: Concentration risk and potential liquidity crunch during a tech downturn
Opportunity: Potential outperformance of Nasdaq-100 ETFs before S&P inclusion
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
S&P Dow Jones Indices decided against fast-tracking companies into the S&P 500.
No matter the valuation, companies must undergo a minimum 12-month period in the public markets before being eligible for the S&P 500.
For now, the Nasdaq-100 seems to be going in the opposite direction of the S&P 500.
S&P Dow Jones Indices dropped a bombshell on June 4, rejecting its earlier proposal to fast-track the inclusion of megacap companies in the S&P 500 (SNPINDEX: ^GSPC).
Here's how the news will directly impact high-profile initial public offerings (IPOs) like SpaceX, Anthropic, and OpenAI, and what you can do about it if you want exposure to these companies through an exchange-traded fund (ETF).
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On April 30, S&P Dow Jones Indices announced it was considering a shorter IPO seasoning period to fast-track the inclusion of megacap companies. It defines megacap companies as being among the 100 largest companies in the S&P 500 Total Market Index -- or at least $157 billion in market cap, based on recent prices. The seasoning period is when companies prove themselves on the public stage through accurate financial filings, governance, and maintaining a certain valuation.
SpaceX is raising $75 billion at a $1.77 trillion valuation -- which would easily put it among the 10 largest S&P 500 components. On May 28, Anthropic raised $65 billion at a $965 billion valuation. On March 31, OpenAI raised $122 billion at an $852 billion valuation.
The largest IPO in history came in 2019, when Saudi Arabian Oil raised $25.6 billion at a valuation of $1.7 trillion. But Saudi Arabian Oil isn't a U.S. company, and it's not part of the S&P 500 or Nasdaq Composite (NASDAQINDEX: ^IXIC).
The U.S. market has simply never experienced IPOs at the scale of SpaceX, Anthropic, and OpenAI -- let alone three in less than a year.
Fast-track entry was meant to give index fund investors exposure to newly public companies, rather than waiting for them to become even more valuable, and risk investors missing out on gains. But S&P Dow Jones Indices' June 4 press release stated that exceptions to its financial viability, seasoning, and investable weight factor requirements won't be granted solely on the basis of market capitalization. In other words, a company can't raise money through multiple funding rounds in the private markets and then muscle its way into the S&P 500. It must still undergo a minimum seasoning period of 12 months.
However, SpaceX, Anthropic, and OpenAI may still gain fast-track entry into the Nasdaq-100, which is the 100 largest non-financial companies by market cap listed on the Nasdaq exchange. On May 8, Nasdaq published a methodology update proposing to weight IPO companies that meet certain criteria based on a multiple of their float, which is the shares available for trading by the public. Nasdaq is considering a range of three to five times the float, which would be $225 billion to $375 billion for SpaceX. That weighting would make SpaceX a large holding in the Nasdaq-100, but nowhere near its market-cap weighting.
If the Nasdaq-100 maintains its fast-track entry criteria, Nasdaq-100 funds like the Invesco QQQ Trust (NASDAQ: QQQ) would offer a way for investors to gain exposure to high-profile IPOs through an ETF wrapper. In its Form S-1 filing with the Securities and Exchange Commission, SpaceX explicitly states its intent to be listed on Nasdaq and Nasdaq Texas under the ticker symbol SPCX.
An alternative option to the Invesco QQQ Trust is to invest in low-cost ETFs whose benchmarks aren't the S&P 500. For example, the Vanguard S&P 500 ETF (NYSEMKT: VOO) uses the S&P 500 index as a benchmark, so it won't be buying SpaceX, Anthropic, or OpenAI until they are officially part of the index. Whereas the Vanguard Total Stock Market ETF (NYSEMKT: VTI) uses the Center for Research in Security Prices (CRSP) U.S. Total Market Index and the Vanguard Growth ETF (NYSEMKT: VUG) uses the CRSP U.S. Large Cap Growth Index as its benchmark. Since these ETFs aren't tied to an index, they will likely purchase SpaceX shortly after its IPO, weighting it based on a multiple of its float rather than market cap.
Normally, when a company goes public, it's relatively easy for investors to ignore it if they aren't interested in buying the stock. But SpaceX, Anthropic, and OpenAI are so massive that they are challenging index and ETF methodology.
S&P Dow Jones Indices' June 4 press release shows that the S&P 500 will be going in a different direction than the Nasdaq, with S&P 500 index investors getting zero exposure to the blockbuster IPOs until at least June 2027. However, if SpaceX, Anthropic, and OpenAI were to at least maintain their respective valuations of $1.77 trillion, $965 billion, and $852 billion, they would make up a combined $3.59 trillion, which is more than Microsoft and behind Nvidia, Alphabet, and Apple. So even if these companies aren't added to the S&P 500 right away, they could heavily disrupt the index soon.
Investors looking to quickly own these newly public companies through ETFs should consider ETFs with benchmarks that aren't the S&P 500, while folks looking to avoid these IPOs may want to buy ETFs whose criteria wouldn't even consider them in the first place -- such as the Vanguard Value ETF or the Vanguard Dividend Appreciation ETF.
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Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Apple, Microsoft, Nvidia, Vanguard Dividend Appreciation ETF, Vanguard Growth ETF, Vanguard S&P 500 ETF, and Vanguard Value ETF. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"Even without S&P 500 inclusion, SpaceX, Anthropic, and OpenAI can still drive outsized market exposure via Nasdaq-100 weights and non-S&P ETFs, creating a skew investors must contend with."
Today's S&P decision keeps megacaps SpaceX, Anthropic, and OpenAI out of a fast track into the S&P 500, but it doesn’t prevent them from dominating market dynamics through other channels. The real story may be how much exposure leaks through Nasdaq-100 weights and non-S&P ETFs, potentially creating a de facto skew even without S&P inclusion. If Nasdaq’s float-based weighting policy remains favorable, these IPOs could become outsized QQQ components, amplifying concentration risk. The piece also glosses over the risk that AI hype, regulatory shifts, or a profits disappointment could unwind valuations just as quickly as they’ve inflated them. Time horizon matters: 2027 is far away, and policy could change along the way.
Policy drift is the real threat: if megacaps push the envelope, the index committees could revise thresholds or fast-track rules, meaning these stocks could join the S&P 500 sooner than the article suggests and undermine the non-S&P exposure thesis.
"The S&P 500's refusal to fast-track will trigger a massive, artificial rotation of institutional capital into Nasdaq-benchmarked ETFs, significantly increasing the volatility of the Nasdaq-100."
The S&P Dow Jones Indices' refusal to fast-track these megacaps is a prudent move for index integrity, but it creates a massive structural divergence in passive flows. By forcing a 12-month seasoning period, the S&P 500 effectively creates a 'valuation vacuum' where massive liquidity flows into the Nasdaq-100 and CRSP-benchmarked ETFs like VTI or VUG instead. This isn't just about index inclusion; it’s about the potential for massive forced buying pressure in Nasdaq-linked products upon IPO. Investors should be wary: if these companies list at these sky-high private valuations, the 'IPO pop' may be muted by the sheer scale of the float, potentially trapping retail investors in overvalued assets.
If these companies are truly generational monopolies, the 12-month seasoning period is merely a temporary delay that protects S&P 500 investors from the extreme volatility inherent in the initial post-IPO price discovery phase.
"The real trade isn't whether to own these IPOs, but whether Nasdaq-100's float-weighting scheme creates unsustainable concentration risk that outweighs the performance advantage through the seasoning period."
The article frames S&P's 12-month seasoning rule as a constraint, but it's actually a feature, not a bug. The real story is index fragmentation: Nasdaq-100 (QQQ) gets these mega-IPOs weighted by float multiples, while S&P 500 funds (VOO) don't. This creates a structural performance gap. If SpaceX, Anthropic, and OpenAI deliver on fundamentals, QQQ outperforms VOO by ~300-500bps annually until S&P inclusion in mid-2027. But the article never quantifies this drag or asks: what if these companies disappoint post-IPO? Valuations ($1.77T for SpaceX) assume perfection. A single earnings miss could crater float-weighted positions in QQQ harder than they'd crater in a market-cap index.
The 12-month wait isn't actually punitive—it's a guardrail. If SpaceX, Anthropic, or OpenAI stumble operationally in their first year public, S&P 500 investors dodge a bullet. Float-weighting in Nasdaq-100 could backfire spectacularly if these companies face governance issues, cash burn surprises, or competitive setbacks.
"Nasdaq-100 ETFs will absorb the only near-term exposure to these IPOs, but via non-standard weighting that could magnify downside if valuations reset."
S&P Dow Jones's June 4 decision locks VOO and SPY out of SpaceX, Anthropic, and OpenAI for at least 12 months after any Nasdaq listing, while Nasdaq's proposed 3-5x float weighting could let QQQ hold $225-375B of SPCX immediately. This creates a rare divergence where growth and total-market ETFs capture early gains that S&P 500 trackers cannot. Yet the article underplays execution risk: these firms must still file audited statements, survive roadshows, and defend valuations above $850B in public markets before any inclusion window opens.
The companies may simply postpone IPOs until after the mandatory seasoning period or see valuations compress sharply once public filings reveal cash-burn details, making the index-rule split irrelevant.
"Concentration risk and liquidity frictions could erase the supposed edge of Nasdaq-100 exposure, making Claude's 300-500bp outperformance premise fragile."
Claude, your 300-500bps outperformance assumption relies on flawless post-IPO execution and persistent float weighting. The bigger risk is concentration risk: if QQQ’s weight tiles large IPOs, a single earnings miss or governance hiccup could punish Nasdaq-100 ETFs far more than S&P funds. Also crowding and liquidity frictions during rebalancing could erase gains in stressed markets, making the supposed edge much more fragile than suggested.
"The index divergence will trigger a massive, destabilizing rotation of institutional capital out of S&P 500 trackers and into Nasdaq-linked products."
Claude and ChatGPT are fixated on index tracking error, but they ignore the primary risk: institutional capital flight. If these firms list with Nasdaq-heavy weighting, they trigger a massive rotation out of S&P 500-linked passive vehicles into QQQ. This isn't just about performance gaps; it's a structural liquidity drain from the broader market. If these IPOs underperform, the resulting sell-off won't just hit QQQ—it will trigger a systemic liquidity crunch across all tech-heavy indices.
"IPO inflows create new capital, not rotations; the real risk is float-weighted concentration during a valuation reset."
Gemini's institutional capital flight thesis assumes passive flows are zero-sum, but that's incomplete. If SpaceX/Anthropic/OpenAI IPO at $1T+ valuations, they're *new* capital entering markets, not rotations from existing S&P holdings. The real liquidity risk isn't rotation—it's if these firms can't sustain valuations post-IPO and forced selling hits QQQ's float-weighted positions during a tech downturn. That's a concentration problem, not a systemic drain.
"Public filings on cash burn could markdown QQQ positions immediately after listing, independent of any rotation from S&P funds."
Gemini's capital-flight and systemic-crunch thesis assumes existing passive money must rotate, yet these IPOs bring in net-new shares and proceeds. The unexamined link is execution: once audited filings expose cash-burn details at $850B-plus valuations, QQQ's proposed 3-5x float weighting triggers immediate markdown pressure on those holdings, well before any 2027 S&P window and without touching VOO or SPY.
The panelists agree that the S&P's 12-month seasoning rule will lead to a significant divergence in passive flows, with Nasdaq-100 and other tech-heavy ETFs benefiting from the inclusion of megacaps like SpaceX, Anthropic, and OpenAI before they enter the S&P 500. However, they also warn about potential risks such as concentration, liquidity, and valuation issues that could arise from these IPOs.
Potential outperformance of Nasdaq-100 ETFs before S&P inclusion
Concentration risk and potential liquidity crunch during a tech downturn