On Friday evening, Nasdaq announced the inclusion of three prominent technology companies—Palantir Technologies, Axon Enterprise, and MicroStrategy—to the Nasdaq-100 index, set to take effect on December 23, 2024. This restructuring marks another strategic move by Nasdaq as it continues its annual reconstitution of the index, which features 100 of the largest non-financial companies listed on the Nasdaq Stock Market.
Palantir Technologies, recognized for its artificial intelligence (AI)-powered software solutions, has recently experienced remarkable growth. Its stock has skyrocketed by 343% year-to-date, compared to the 29% return of the S&P 500 during the same period. This staggering increase is likely what earned Palantir its spot on the index.
The motivation behind Nasdaq’s decisions is primarily rooted in the companies’ market capitalizations and their notable performance. The same spotlight falls on MicroStrategy and Axon, which have witnessed stock surges of 547% and 150%, respectively, throughout 2024. MicroStrategy, functioning primarily as an enterprise software firm, has gained traction due to its heavy investments in Bitcoin, making it particularly attractive to cryptocurrency enthusiasts. Meanwhile, Axon, known for providing body cameras and other technology to law enforcement and military organizations, has also enjoyed strong market momentum.
According to Nasdaq’s announcement, the companies being removed from the index—Super Micro Computer, Moderna, and Illumina—have faced significant challenges this year. Super Micro Computer, for example, has been embroiled in scrutiny due to accusations surrounding accounting manipulations, contributing to its stock drop of 69% since its all-time high earlier this year. Although the stock is up nearly 30% for 2024, it remains well below its peak.
Other removals include Moderna, whose shares have suffered significantly due to plunging sales of its COVID-19 vaccine, with its stock down 58% year-to-date. Illumina, primarily focused on genomics, performed slightly less poorly with only 6% gains this year but was nonetheless affected by the broad tech sell-off. Nasdaq’s restructuring reflects not only the changes within specific companies but also broader market sentiments. The recent good news surrounding Palantir stocks may have also been influenced by its impressive Q3 earnings, which exceeded Wall Street’s expectations and bolstered the company’s forward-looking guidance.
The question remains: how will the inclusion of these companies affect investors? Nasdaq membership can offer significant advantages. Index membership means mutual funds and exchange-traded funds (ETFs) tied to the Nasdaq-100 will be required to purchase shares of Palantir, Axon, and MicroStrategy, likely exerting upward pressure on their stock prices as demand increases. This heightened visibility can potentially make these stocks more attractive to investors, creating additional value for current shareholders.
The anticipation surrounding these indices and the stocks involved reflects larger trends within the tech industry. The Nasdaq-100 recently achieved significant milestones, surpassing the 20,000-point threshold for the first time, as tech stocks generated excitement following inflation data encouraging expectations of interest rate cuts by the Federal Reserve. This juxtaposition of stability and uncertainty highlights the ever-evolving nature of the stock market.
The upcoming reconstitution and addition of these tech firms may serve as a boon not just for Palantir, Axon, and MicroStrategy themselves, but for the tech sector as a whole. The integration of innovative companies such as these within the Nasdaq-100 highlights the resilience and growth potential of the tech industry, even amid economic variability.
With opportunities arising for investors, the dynamics within the Nasdaq-100 raise key questions for the market: How will newly included stocks align with future expectations? What might this mean for long-standing players like Super Micro Computer and Moderna facing uphill battles? Only time will tell what impact this restructuring has on investor sentiment and the companies involved. For now, stakeholders will be closely monitoring market patterns to gauge the direction of their investments.
