According to the announcement, these adjustments aim to ensure that the S&P 500 remains reflective of U.S. companies with large market capitalisations. “The changes ensure each index is more representative of its market-capitalisation range,” stated S&P Dow Jones Indices.
Stocks Surge Following Announcement
Following the news, shares of Palantir and Dell saw a significant rise in after-hours trading, with Palantir’s stock surging by nearly 8% and Dell’s by 7%. The boost is largely due to fund managers updating their portfolios to reflect the addition of these companies to the benchmark U.S. large-cap index. Historically, companies included in the S&P 500 often experience a rally as investors seek to capitalise on the increased market attention.
Dell’s Return to the S&P 500
For Dell Technologies, this inclusion marks a return to the S&P 500. The computer and server maker had previously been part of the index until 2013 when the company went private in a deal led by founder Michael Dell and private-equity firm Silver Lake. Dell re-entered the public market in 2018 and has since achieved consistent profitability, bolstered by strong demand for AI-powered servers. In 2023, Dell’s stock jumped by 90%, reflecting the company’s impressive growth, especially in artificial intelligence (AI) server sales.
Dell’s AI-related success is a major factor in its recent financial performance. The company reported $3.2 billion in AI server demand for the quarter ending August 2, a 23% increase from the previous quarter. This growth is driven by the increasing importance of AI workloads and the utilisation of Nvidia graphics processing units (GPUs) in Dell’s server technology.
Palantir’s Rise and Profitability
Palantir, founded as a data management startup over 15 years ago, made its public debut on the New York Stock Exchange in 2020. Known for its role in helping companies and government agencies manage vast amounts of data, Palantir has recently experienced steady revenue growth, with net income reaching $135.6 million in the second quarter of 2023, up from $27.9 million a year earlier.
CEOAlex Karp emphasised the importance of profitability, particularly in light of the company’s eligibility for inclusion in the S&P 500. “My interest in profitability is for obvious reasons,” Karp remarked in May 2023, adding that the company’s growing profitability would enhance its market standing and visibility among investors.
Conclusion
The addition of Palantir, Dell, and Erie Indemnity to the S&P 500 highlights the ongoing transformation of the U.S. large-cap index as technology companies continue to assert their dominance. As these companies prepare to take their places in the index on September 23, their recent financial successes underscore their increasing importance in the global market. Meanwhile, the reshuffling reflects the dynamic nature of the S&P 500 as it adjusts to maintain an accurate representation of market capitalisation.
