SpaceX's Nasdaq 100 inclusion comes with a historical warning

Summary

• SpaceX joins the Nasdaq 100 on July 7 after a blockbuster IPO that surged 50% on debut, but shares have already fallen 28% from their all time high.
• Previous high profile Nasdaq 100 additions, including Palantir and Strategy, peaked around or before their inclusion dates, suggesting index membership is not always a bullish catalyst.

SpaceX (SPCX) is set to officially join Wall Street's tech-heavy Nasdaq 100 index on July 7 after raising $75 billion in the largest iPO of all time in mid-June.

The stock immediately surged to as high as $225 in the days after the June 12 IPO,only to deflate to $162 last week. Now the big question is what happens after it is included in the Nasdaq index.

The answer is not necessarily bullish when viewed through the lens of history.

Past data suggests that index inclusion, often viewed as a positive milestone, is not a reliable bullish signal, particularly after a stock has already experienced a significant rally.

That's because, in many cases, investor optimism is already elevated and peaked, passive fund buying has largely been anticipated, and expectations are priced in.

The two most notable recent additions to the Nasdaq 100 highlight this pattern.

Palantir (PLTR), the software giant, joined the index on Dec. 23, 2024, but the stock peaked around the time of its inclusion and declined roughly 25% in the weeks that followed.