SpaceX Lands on the Nasdaq-100: What Comes Next for Investors

Space Exploration Technologies (NASDAQ: SPCX), or SpaceX for short, recently became the largest initial public offering (IPO) in history. And at a market cap of about $2 trillion, it's already one of the world's most valuable companies. Its hefty valuation has led to the company's inclusion in several market indexes, including the popular growth and tech-focused Nasdaq-100.

Although companies don't typically join major indexes so soon after their IPOs, SpaceX is a special case due to its size and high profile. It's one of only a few publicly traded space companies and has immense upside in artificial intelligence (AI) following its merger with xAI earlier this year.

Here's what SpaceX's inclusion in the Nasdaq-100 actually means for investors right now.

Image source: The Motley Fool.

Indexes create demand through passive buying

It's significant anytime a company joins an index, especially a popular one such as the Nasdaq-100. Now that it has added SpaceX, every index fund that tracks it must buy the stock in proportion to its weight in the index. Despite SpaceX's huge market cap, it won't represent much of the Nasdaq-100 at first.

The index weighs stocks based on their float, the number of shares publicly available to investors. The company went public with a very small float, making only about 4% of its total shares available to the public when it began trading.

As a result, SpaceX will initially account for only about 1% of the Nasdaq-100. That may change as lockups expire over the next 180 days, and the float grows as more shares enter the market.

It's unclear whether that can overcome a steep valuation

SpaceX's inclusion in the index is generating buying demand for the stock, but it's not a given that it will be enough to drive up the share price. In fact, the stock actually tumbled nearly 7% on its first day in the index. Investors should be wary of the stock's high valuation, which could continue to drag on its performance.

Even though the shares have fallen back to around $148 after an initial surge to $225, SpaceX still has a huge market cap of $1.95 trillion. That values the business at more than 100 times its 2025 revenue of $18.6 billion. That's an extremely difficult ratio to sustain without blistering growth to keep investors willing to pay such high prices to own the stock.

SpaceX does have ample growth potential over the next decade and beyond. But some of its ambitions, such as putting AI data centers into orbit, won't happen right away. It wouldn't surprise me to see the stock continue to slide as investors weigh its valuation against the company's near-term growth outlook.

Justin Pope has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.