The Trillion-Dollar Battle for the S&P 500: Damodaran’s Warning

The landscape of global investing is facing a seismic shift as private giants like SpaceX and OpenAI prepare to enter the public markets. NYU Stern Professor Aswath Damodaran warns that the battle to include these trillion-dollar entities in the S&P 500 could fundamentally alter the index's risk profile and the very nature of passive investing.

The Tug-of-War Over Index Inclusion

With SpaceX having completed a historic IPO in June 2026, and AI heavyweights like OpenAI and Anthropic following suit, a dilemma has emerged for S&P Dow Jones Indices. The index faces a paradox: it claims to represent the largest US-listed companies, yet it currently excludes some of the most significant market-cap leaders due to strict eligibility rules.

However, Damodaran notes that S&P is playing a cautious game. To mitigate uncertainty, the index provider has reaffirmed its rule requiring at least one year of public trading before a company becomes eligible. This means that even if SpaceX, OpenAI, or Anthropic list in 2026, they likely won't see inclusion in the S&P 500 until 2027 at the earliest.

Risks of Fast-Tracking Trillion-Dollar Giants

The core of Damodaran's critique lies in the financial health and governance of these upcoming giants. He points out that even a year after listing, companies like SpaceX and OpenAI may still be money-losing businesses with "business models that are still works in progress."

Integrating these massive, potentially volatile companies into a market-cap-weighted index carries significant consequences:

  • Earnings Impact: Inclusion could lead to a near-term hit to the index's aggregate earnings.
  • Risk Profile: Adding companies with "corporate governance horror stories" will inherently increase the index's risk.
  • Growth Potential: While risky, their inclusion could provide a long-term boost to the index's growth metrics.

Damodaran argues that the power dynamic has shifted; S&P needs these companies to maintain its relevance as a "large-cap" benchmark more than these companies need the index.

Debunking the "Index Inclusion Windfall" Myth

Jambo muhimu la kuzingatia kwa wawekezaji wadogo na wa kitaasisi ni kupungua kwa faida za "mbinu za kuingia kwenye kielelezo" (index inclusion plays). Kihistoria, wawekezaji wengi walitafuta kununua hisa mara tu kabla ya kuongezwa kwenye S&P 500, wakitarajia ongezeko la bei la uhakika.

Akitumia data kutoka kwa ongezeko la 715 na uondoshaji wa 711 kati ya mwaka 1995 na 2021, Damodaran anasisitiza kuwa "athari ya kielelezo" (index effect) imepotea kwa kiasi kikubwa. Katika miongo miwili iliyopita, ongezeko la bei la muda mfupi kutokana na kuingizwa kwenye kielelezo limefifia hatua kwa hatua. Kwa kweli, anaeleza kuwa kampuni zinazoongezwa kwenye S&P 500 sasa zina uwezekano mkubwa wa kufanya vibaya kuliko kufanya vizuri katika miezi 12 inayofuata baada ya kuingia. Anataja kuingizwa kwa Tesla mwaka 2020 kama mfano mkuu, ambapo hisa hiyo ilifanya vibaya sana kuliko kielelezo baada ya kuingia.

Mambo Muhimu ya Kuzingatia

  • Uingizaji wa Kuchelewa: Kutokana na sheria ya S&P ya biashara ya mwaka mmoja, makampuni makubwa sana (mega-caps) kama SpaceX na OpenAI hayataingia kwenye S&P 500 hadi angalau mwaka 2027.
  • Mabadiliko ya Kimfumo: Kuongeza makampuni yenye thamani ya trilioni za dola lakini yanayopoteza pesa kutazidisha hatari ya kielelezo na kuathiri mapato yake ya jumla na taswira ya ukuaji.
  • Mapato Yanayopungua: "Ongezeko la bei" la kihistoria linalohusishwa na kujiunga na S&P 500 limepotea kwa kiasi kikubwa, jambo linalofanya "kuingizwa kwenye kielelezo" kuwa msingi hatari kwa mbinu za biashara.