SpaceX shares slide as it joins the tech-heavy Nasdaq-100

Musk-led company joined the index on Tuesday, less than a month after its stock market debut on June 12, among the fastest inclusions ever.

SpaceX’s swift addition to the Nasdaq-100 index is expected to unleash billions in passive buying, as brokerages kicked off coverage of the $2 trillion rocket and satellite company with largely bullish views.

The Elon Musk-led company joined the index on Tuesday, less than a month after its stock market debut on June 12 – among the fastest inclusions ever – thanks to the Nasdaq’s revised rules for newly listed companies looking to enter widely tracked benchmarks.

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Its entry in the tech-heavy index creates another source of demand for its stock as index funds and exchange-traded funds (ETFs) tied to the Nasdaq-100 will need to buy shares to match the benchmark’s new composition.

However, shares of SpaceX fell 5.4 percent, reflecting a slide in high-momentum tech stocks, including Micron Technology, on concerns about the longevity of the AI boom.

“There’s nervousness about expectations being too high,” said Mark Hackett, chief market strategist for Nationwide. “I expect that to continue until we get some earnings out.”

The stock carries a 1.34 percent weight on the Nasdaq-100, according to LSEG data, far below that of several heavyweights, including Nvidia and Apple, as Nasdaq adjusts its weight based on free-float or the number of shares available to trade publicly.

Bullish views

Historically, there is a waiting period between when a company goes public and when it is listed on the Nasdaq-100 index and/or S&P 500, and companies must demonstrate profitability over four quarters for the S&P 500 and three calendar months for the Nasdaq-100, excluding the month of listing. SpaceX lobbied for a waiver for so-called mega cap companies. In early May, Nasdaq made a rule change that could allow the Texas-based company to enter the index after just 15 trading days. S&P Dow Jones Indices, which runs the S&P 500 index, did not change its rules.

More than a dozen brokerages, including SpaceX IPO underwriters Morgan Stanley, Goldman Sachs and JP Morgan, started coverage of SpaceX with top ratings, in Wall Street’s first attempt to value it using conventional metrics rather than the investor faith in Musk’s long-term vision.

“We see the company as well-positioned to scale its differentiated advantages across space, connectivity, and AI,” Goldman Sachs analysts said, betting each market has the potential to become a multi-trillion-dollar opportunity over a five-year-plus horizon.

Most analysts see Starship, SpaceX’s fully reusable next-generation rocket, as the key driver of the company’s lofty growth projections.

Wall Street forecasts thousands of Starship launches annually by 2031, with JP Morgan projecting about 5,000, Wells Fargo 4,600, Bernstein 3,500, and UBS more than 1,500, depending on how much reusability SpaceX achieves.

Raymond James set a Wall Street-high price target of $800 on SpaceX, arguing it could become one of the century’s defining infrastructure platforms. SpaceX’s IPO was priced at $135 per share.

However, not everyone is bullish.

MoffettNathanson, KeyBanc and Argus Research have the equivalent of “neutral” ratings, while CFRA is the only brokerage with a “sell” rating and a Street-low price target of $115.

Bet on AI

Investors are betting SpaceX can evolve into a hyperscale AI infrastructure provider in the near term, taking on OpenAI’s GPT models and Anthropic’s Claude with its Grok model.

They also see significant room for Starlink to expand its dominance in satellite communications, while much of the company’s longer-term ambitions depend on the successful development of its next-generation Starship rocket.

“SpaceX has a clear advantage in deploying AI infrastructure on the ground and eventually in orbit, positioning it as the leading ‘haloscaler’, ultimately able to deliver compute at the lowest cost,” Deutsche Bank analysts said.

With a market capitalisation of about $2 trillion, SpaceX is the sixth-largest US company, and its CEO, Elon Musk, is the world’s first trillionaire.

FTSE Russell added the stock to its US indexes last month, with funds such as iShares Russell 1000 ETF already giving investors a piece of the biggest IPO in US history.

However, S&P Global declined to create a similar fast-track process for the benchmark S&P 500 in June, and it is expected to take at least a year before SpaceX joins the world’s most widely tracked index.