Palantir Misses Out, Super Micro Computer Makes The Cut: What Investors Should Know About S&P 500 Quarterly Rebalance

AI stock play Palantir Technologies, Inc. PLTR was not included in the S&P 500 Index in the latest quarterly rebalance of key S&P indices announced on Friday.

What Happened: AI server manufacturer Super Micro Computer, Inc. SMCI and California-based footwear designer and distributor Deckers Outdoor Corp. DECK will join the S&P 500 Index, effective March 18, S&P Dow Jones Indices, a division of S&P Global, said in a release.

Super Micro Computer and Deckers Outdoor will replace Whirlpool Corporation WHR and Zions Bancorporation, National Association ZION, respectively, in the index. The latter two will take the former two’s places in the S&P MidCap 400 Index.

The S&P 500 Index is considered the best single gauge of large-cap U.S. equities and includes 500 leading companies, covering approximately 80% of available market capitalization. The S&P 500, a market-cap weighted index, is rebalanced quarterly, usually on the third Friday of March, June, September and December.

During the rebalance, companies are typically removed or added, taking into account the most recent share count and float of constituent companies and adjusting their weights in their index.

The eligibility criteria for S&P 500 Index inclusion are a market capitalization of $15.8 billion or more, am annual dollar value traded to float-adjusted market capitalization greater than 0.75, a listing in either NYSE or NASDAQ, and a primary listing in the U.S. There is a trading-volume criterion as well.

Following Super Micro Computer’s inclusion, CNBC Mad Money host Jim Cramer said the stock is a “nasty short” but a “very good long.”

Supermicro headed into the S&P. NASTY SHORT.. very good long

— Jim Cramer (@jimcramer) March 1, 2024

See Also: How To Invest In The S&P 500

The Palantir Disappointment: Much against expectations, Palantir wasn’t added to the broader gauge this time around. Investors in the company expressed disappointment over its exclusion on social media, though some found a silver lining. One said another three months before the next rebalance would allow time for institutional accumulation.

I think it's a bit too early for $PLTR to enter the SPX, but 3 months from now should allow time for a bit more institutional accumulation and price stability (above $20).

— Crossroads (@Kross_Roads) March 1, 2024

Why It’s Important: Index inclusion is typically positive for stocks, as funds holding portfolios mirroring the index will buy them to maintain the respective weightings of the component stocks. The stock will also benefit from increased volume and liquidity due to purchases by index funds and ETFs.

Following the announcement, Super Micro Computer and Deckers Outdoor rose 12.54% and 4.40%, respectively, in after-hours trading on Friday, according to Benzinga Pro data. Palantir, meanwhile, fell 3.81%.

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