In a significant announcement, Standard & Poor’s Global (S&P Global) has revealed that technology giants Dell and Palantir will be added to the S&P 500 index. Following the announcement, both companies experienced a surge in their share prices, rising approximately 7% in extended trading on Friday. This move is expected to have a positive impact on the stock market, as fund managers who track the index will update their portfolios to reflect the new additions.
According to a statement from S&P Global, software developer Palantir will replace American Airlines, while Dell will replace Etsy. This decision comes as a result of the regular rebalancing of the index, which involves the inclusion of new companies and the removal of others.
For Dell, this announcement marks a significant return to the benchmark index. The computer and server manufacturer was a component of the index from 1996 to 2013, before being taken private by founder Michael Dell and private equity firm Silver Lake. Dell re-entered the public market in 2018.
The inclusion of Palantir, which operates as a risk investment-backed startup, is also a significant development. After operating as a startup for over 15 years, Palantir went public on the New York Stock Exchange in 2020 and began generating profits in the fourth quarter of 2022. The company’s net revenue for the second quarter was $135.6 million, up from $27.9 million in the same period last year, with its annual revenue accelerating in each of the last four quarters.
Alex Karp, co-founder and CEO of Palantir, has gained fame in the tech industry for advocating patriotism and helping government and military agencies manage data. In a recent interview with The New York Times, Karp said Palantir is involved in finding hidden things.
To join the S&P 500 index, a company must have achieved profitability in the most recent quarter and cumulative profitability in the last four quarters. Karp commented on the importance of profitability during a May 2023 conference call with analysts, stating, My interest in profitability is clear, but I also believe that as we become eligible for inclusion in the S&P 500, we will be in a more favorable position.
Dell has nearly achieved profitability in every quarter since 2019. In 2023, the company’s stock surged 90%, and it increased by 33% before the rebalancing announcement. The growth is primarily attributed to the sales of servers that can handle artificial intelligence workloads, which include NVIDIA GPUs. Dell reported to investors on August 29 that the company’s AI server demand reached $3.2 billion in the quarter ending August 2, up 23% from the previous quarter.
Cybersecurity provider CrowdStrike was also added to the index during the last rebalancing in June.
S&P Global stated that the new index better reflects the high-market-value U.S. stocks. The median market value of the index is approximately $335 billion. Palantir’s market value exceeds $67 billion, while Dell’s valuation is over $72 billion.
Another software manufacturer, Workday, saw its after-hours stock price fall by 2%. In an email sent earlier on Friday, the U.S. Bank trading desk listed Workday and Palantir as the best candidates for inclusion in the S&P 500.
The inclusion of Dell and Palantir in the S&P 500 index is expected to have a positive impact on the stock market and reflect the growing importance of technology companies in the global economy.
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