S&P 500 rejects SpaceX, also blocking entry for OpenAI and Anthropic

A certain amount of required scrutiny and experience derisks that possibility. Also remember pre-IPO the valuation isn't set by the broader market, so you don't know if any of these valuations are even real. Do we want to set a precedent where banks can put any price tag they want on a pig everyone is forced to buy?

Once these companies go through the same process Google or any other S&P member did, they're welcome to join the party.

1. Google has a history of profits. Their move into AI isn't coming at the expense of Search Ad revenue, and can be seen as defending it for the future. Their last annual report shows continued growth in this sector. So the P:E ratio isn't NaN.

2. Their stock prices has survived the test of market trading and multiple reporting windows, short sellers, WSB regressive behavior, etc. In part because they have a huge publicly tradeable float.

3. There isn't a huge bundle of shares in lockup until six months after the IPO that would put selling pressure on the symbol.

It's also a safer bet as a company, though that technically shouldn't be the criteria for indexing:

1. Google has a diverse product line: youtube subs, search ads, adwords, cloud services, etc. And a demonstrated ability to launch more (probably too many more).

2. They have a huge existing customer base to upsell to; cost of customer acquisition would be low for quite a while.

3. Anthropic and OpenAI are dependend on nvidia to supply them every beefier chips, while Google has their own TPUs to run on and lease out to others.

I don't want my life savings tightly coupled to a young and hyped up technology which is currently being wielded in the most antisocial way possible.

Simple as.

OK, then put your money in VTI/VTSAX instead of a S&P 500 fund. I own some VTI and also some FXAIX, you can do the same thing and choose which index to buy.

On a side note, I find it very sad that strong job numbers make stock plummet.

It really is an indication that the stock market is mostly speculative and not concerned about the actual economy.

Of course this all becomes moot if all the companies crash out. I don't think enough people are asking what if these companies don't crash out though.

No, companies are meant to be successful.

"Profit" is surplus money that could have been invested earlier in R&D, product development, employee benefits or customer service.

Instead, many companies decide to forego developing themselves for the 'advantage' of a 'record profits' headline and the privilege of giving a quarter of the surplus away as tax.

Your concerns sound valid provided things continue on as they have (I'm not a financial advisor and this is not financial advice) but the commenters above you are specifically worried that it's not going to do that. In which case, the disadvantages you point out of the equal-weight index will be handily outweighed. If an AI bubble popping causes the market-weighted funds to suffer, it doesn't matter that we've avoided trading fees along the way.

Assuming that all the claims are true, this would lead to a collapse under its own weight, because at that point, supposedly, most people won't be needed in the jobs they currently occupy.

Assuming the claims aren't true, there will be a reckoning where all the glitter thrown will hit the ground and people that invested would like to have their marbles back at whatever the cost.

I'd be betting on the latter rather than the former. BECAUSE all those companies are RUSHING for an IPO because none of them want to be left with the bag.

Just for the sake of comparison and to put things in perspective, just for the spaceX situation, running a datacenter is no easy task and require significant maintenance and supporting infrastructure, now you're going to tell me that you can achieve the same and even more in space where virtually everything is more complicated to achieve? And you're telling me that your entire business, or at least a big majority of it, will be this entirely unproven infrastructure? Seems like a bit of a stretch to me...

Now this being said, somehow some things may lie in the middle, but people seem to be a bit either too fond of the claims or too aggressive towards some part of the tech stack.

I see this sentiment often, and think it is short-sighted:

1. The tech fails at the goal - profitability is what we see for any tech that augments humans, which isn't anywhere close to satisfying the trillions in debt, busting the market and bleeding trillions from the economy.

OR

2. The tech succeeds at the goal - humans are mostly not needed anymore other than for menial low-paid work. Economy slows, then almost completely stops.

What is the outcome you see that keeps you optimistic? How do you intend to avoid the soup kitchen if this all works out? Because, you see, if this all works out you will have nothing of value to contribute too.

Same as the dotcom and same as the railroads.

It does not necessarily follow that it being a technological revolution also means that it is a good investment—at least, perhaps, at this point in time. Railroads were a tech revolution, but a lot of them—and their investors—went bankrupt once the hype subsided and the overbuilding stopped. Once consolidation happened after their crash then railroads became a stable investment.

There are numerous examples of this in history, starting with (at least) canals; see Perez:

* https://en.wikipedia.org/wiki/Technological_Revolutions_and_...

If all that works out. Most people including me so far don't see the promised revolution, productivity gains are meager since not all of us work in code sweatshops churning simple crud or similar apps out like there is no tomorrow, llm models are extremely unreliable, confidently hallucinating shit out of blue, their quality highly varies over time as compute is present or not.

If thats your revolution, well fuck that revolution we can do better as mankind. Its probably a change, but bearing hallmarks of the worst in mankind we could muster together and seems to bring the worst traits out of humans, ie greed.

Yup. Which is why it was always a long shot. I personally thought they'd adopt some of the seasoning rules, but they were more conservative than even that.

I suspect this will be revisited if all these companies are still 1T+ market cap 12 months from now. At some point the S&P will have to say the market itself has spoken and likely capitulate.

Look up rebalancing trades, or, less graciously, rebalancing front running. If the index is going to rebalance to include a new entrant, you'll see the other components trade down in anticipation. It's a very tight signal, and it wasn't present to any measurable degree for the S&P 500.

This percentage directly determines the influence on SP500 index funds holders (SPY, VOO, etc.).

The outcome could have been:

1. not included (0%)

2. included, weight by free float (0.3%) --- 54th in the list between $AXP and $MCD

3. included, weight by free float x 3 (0.9%) --- 19th in the list between $ORCL and $JNJ

4. included, weight by market cap (1.75 trillion / 67 trillion = 2.6%) --- 8th in the list between $AVGO and $META

https://www.slickcharts.com/sp500

#2 is _much_ closer to #1 than #3 (let alone #4), meaning that had an exemption been made to allow SpaceX in, given the rest of the existing rules, at least the impact to ETF holders would not be outblown. The same could not be said for NASDAQ , which was the main source of all the debate.

I'm sure you know this, but the rules have been changed many times over the years. Now that companies IPO much later with huge market caps, I suspect we'll see more rule changes over time. The S&P 500 is fairly conservative, so they held tight this time. If these companies are still 1T+ 12 months from now, there will be a very strong argument that the market has decided these companies are important regardless of current profitability, and the S&P will likely have to revisit.

These are not valid arguments. The companies that get added to the S&P are always owned in some fraction by rich people.

SpaceX is obviously majorly owned by Elon, but it’s also owned by regular employees, a bunch of private investors and other funds that regular people invest in.

> They're not profitable.

Right

> When they prove they're worth the dollars,

Profitable isn’t related to “worth the dollars”. You need to look at income and how much is being reinvested into growth. Amazon famously remained unprofitable due to reinvestment and waiting for them to become profitable before investing was a bad bet.

This is as per Patrick Boyle's https://youtu.be/IHD8BDFYyGI?si=FZ52TSEYnpJwZ1FT

Look at what happened with Uber: they were a giant incinerator that ran on investment cash for years and years and years in a low interest rate environment.

Since we have an at least somewhat-sane fiscal policy for the time being, they can't do that anymore. Now, they have to find other source of cheap cash that comes with few or no strings that could ever make the almighty founder class have to consider someone else.

Could they compete with other investments on the open market by adjusting what shareholders could expect? Sure, but that would mean potentially diluting the equity that the founders and early investors could get, and when you consider that OpenAI thought that the 100x cap wasn't generous enough, I think you get an idea of what kind of greed we're dealing with here.

Passive investors were their target for this: lots of money, not a lot of questions.

It'll be interesting to see what they go for next. I'm willing to bet Trump starts screaming at the Fed to lower rates again.

> at worst you loose your savings

This is a pretty optimistic take on how much money people who live paycheck to paycheck can actually save. I'd probably suggest that poor people with savings start a business over investing.

There’s a lot of advocacy for passive investing because it’s practically the only good option for retail investors. Managed funds can actually afford to advertise.

There are problems with passive investing becoming such a large portion of public investment, it is practically corporate welfare. But when the alternatives are at or around 2 and 20, with most performing worse than index funds, it’s irrational for the average person to do anything but passive investing.

If it's the first time it's failing then there's really nothing anyone can do to prepare for it, and I certainly wouldn't recommend laypeople to try to time the market.

There again now.

Yes. Then rules were changed. Then they were unchanged.

S&P is explicitly a committee-based index. It's not hard and fast rules driven. (Russell markets itself as being super duper rules based. It's a good niche. It's also so wildly complicated as to be, in practice, at least to me, indistinguishable from the committee-based method.)

Elon undoubtedly tried to corrupt this process. But there were loads of non-corrupt reasons to look at a few trillion dollars of market cap hitting the market and ask how that should impact how various indices are calculated. The answer we've come to, that the tech and total-market indices should reflect the change while large caps should not, is a pretty good one.

People speak about "diversification" without truly understanding why they're diversifying or what the covariance of their portfolio is, and then just cite statistics about how "on average".

It's a lot harder to walk the walk when your entire portfolio has been underwater for 7 years without sign of coming back; loose money has prevented that but the grifts are starting to get to the end of their strings.

S&P adopting the rule changes.

> It already happened in Nasdaq

NASDAQ 100 is marketed as a tech-focussed fund. It's also way smaller. And it makes sense for it to include new issues. Total-market funds are also being adapted to include these, and again, that makes sense.

> for most investors it already did happen

What do you mean? For the vast, vast majority of investors, nothing happened. If S&P had adoped these rules, the majority of investors would still be unaffected.

> when is it appropriate/intellectually OK to respond to allegations of corruption by saying ‘stop freaking out, it’s only a small amount of corruption PER PERSON’

I'm saying the allegations of corruption were misplaced. The rule changes have been mooted for years. Did Musk et al try to put their thumbs on the scale? Sure. That should be called out.

But the scaremongering that followed was full of factual misrepresentations. Moreover, it presumed corruption across the board versus certain actors trying to corrupt a process, all for the purpose of getting views.

Who tend to come up with bumfuck benchmarks other than the common ones. Sometimes for good reasons. Often to justify their own comp.

> Many would be better off using an S&P 500 index fund

Maybe. They would probably be better off with some total-market funds (instead of biasing towards large caps, especially if they're small). But my point stands: pension funds don't tend to automatically follow any major index, much less the S&P 500 proper.

In the same way 9/11 was quite clearly an inside job.

Alternatively, a crop of big companies with real, potentially world-changing technology are going public.

This isn’t exactly pets.com we’re talking about.

Why do you tolerate that and not this?

The whole “VC in non-profit” thing was a trend from 2012 to 2017 or so and it did not work out for this reason.