Why Marvell Stock Popped Today
Key Points
Some of the largest funds in the world will soon need to buy Marvell's shares.
The optical networking supplier's investors could be in store for even more gains.
- 10 stocks we like better than Marvell Technology ›
Shares of Marvell Technology (NASDAQ: MRVL) leaped on Monday, following news that the semiconductor leader is set to join the S&P 500 (SNPINDEX: ^GSPC).
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Earning a place among the titans of industry
Marvell and electronics manufacturing services provider Flex will replace soup maker Campbell's and swimming pool equipment distributor Pool Corp in the S&P 500 index on June 22.
As its name suggests, the S&P 500 comprises 500 of the largest (by market capitalization) and strongest businesses in the U.S. stock market. Funds tracking the S&P 500 have attracted staggering amounts of investor capital, with the Vanguard S&P 500 ETF alone amassing over $1 trillion in assets.
When a stock is added to the S&P 500, funds that track the index need to purchase its shares. Traders, in turn, often try to front-run these purchases. This can lead to a surge in demand for a new index entrant's stock that can temporarily drive up its share price.
More gains could lie ahead for shareholders
In Marvell's case, however, the gains might not be just transitory. The chipmaker's high-speed optical networking and connectivity solutions have become crucial equipment for AI factories. So much so that Nvidia CEO Jensen Huang recently said that he believes the $253 billion tech giant will be the "next trillion-dollar company."
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Marvell Technology, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool recommends Campbell's, Flex, and Pool. The Motley Fool has a disclosure policy.
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