The Trillion-Dollar Battle for the S&P 500: SpaceX, OpenAI, and Risk

As private giants like SpaceX, OpenAI, and Anthropic prepare for massive public listings, a fundamental tension is emerging regarding the future of the S&P 500. NYU Stern Professor Aswath Damodaran warns that the inclusion of these trillion-dollar entities could fundamentally alter the risk and earnings profile of the world’s most influential stock index.

The Dilemma of Trillion-Dollar Giants

The landscape of the S&P 500 is facing a reckoning. Following SpaceX’s historic IPO on June 12, 2026, the market is anticipating mega-cap listings from AI leaders like OpenAI and Anthropic. This creates a paradox for S&P Dow Jones Indices: the index claims to represent large-cap US companies, yet it currently excludes some of the largest market-cap players in the world.

However, Damodaran notes that these companies are not "plug-and-play" additions. He describes them as "money-losing businesses" with business models that remain works in progress and "corporate governance horror stories." To manage this, S&P has reaffirmed its rule requiring at least one year of public trading before eligibility, effectively pushing any inclusion of SpaceX or OpenAI to 2027 at the earliest.

Shifting the Index Fundamentals

While adding these giants won't immediately move the index level due to divisor adjustments, it will fundamentally change the index's DNA. Damodaran argues that the inclusion of such massive, unprofitable entities will result in:

  • Increased aggregate risk: High-volatility stocks entering a benchmark.
  • A near-term hit to earnings: The heavy weight of non-profitable companies diluting the index’s aggregate earnings.
  • Potential long-term growth: The upside of capturing the AI and space-tech revolutions.

Crucially, Damodaran suggests the power dynamic has shifted. "S&P needs these companies in its index more than they need to be in the index," he asserts, implying that the index providers may eventually bend their rules to accommodate these massive market movers.

Debunking the Index Inclusion Myth

A major takeaway for Indian and global investors is the warning against "index inclusion" trading strategies. Many investors believe that being added to the S&P 500 guarantees a stock rally. Damodaran refutes this, citing a study of 715 additions between 1995 and 2021 which shows that the "index bump" has largely disappeared.

In fact, he notes that companies added to the S&P 500 are now more likely to underperform than outperform in the 12 months following their entry. He points to Tesla’s December 2020 inclusion as a prime example, where the stock massively underperformed the small REIT it replaced shortly after joining the index.

Key Takeaways

  • Delayed Inclusion: Due to S&P's one-year trading rule, trillion-dollar companies like SpaceX and OpenAI likely won't join the S&P 500 until at least 2027.
  • Structural Changes: Adding these companies will shift the S&P 500 toward higher risk and lower aggregate earnings, despite the potential for higher long-term growth.
  • Vanishing Index Premium: The historical "price bump" seen when a stock joins the index has largely eroded, making it an unreliable strategy for active traders.