The committee that selects the components of the S&P 500 has discretion in selecting new members, and it appears to be preferring relative stability over volatility this time.
S&P Dow Jones Indices announced Friday that four new businesses will be added to the index later this month, with DoorDash Inc. (DASH) being the biggest of the upcoming additions. TKO Group Holdings Inc. (TKO), Williams-Sonoma Inc. (WSM), and Expand Energy Corp. (EXE) will join DoorDash in the S&P 500 SPX.
Some of the biggest American corporations by market capitalization are included in the S&P 500, but it’s more than just a list of the top 500. For starters, businesses need to fulfill requirements related to float and profitability, among other things. Furthermore, the committee may consider factors like volatility and sector diversification when determining who makes the cut, even when it comes to market capitalization.
Therefore, even though DoorDash is among the larger businesses that satisfied the requirements for inclusion this time, it wasn’t the largest; two larger businesses, AppLovin Corp. (APP) and Interactive Brokers Group Inc. (IBKR), were not selected.
This time, the index committee decided against altering the S&P 500’s technological components. Despite being tech-related, DoorDash, an online food delivery service, is seen as a consumer-discretionary business. Compared to app-monetization startup AppLovin, which was the focus of two short-seller reports late last month, it would have been viewed as a more reliable investment.
Although it is down to begin this year, AppLovin’s stock is also coming off a run of more than 700% last year. After rising 70% last year and somewhat more so far in 2025, DoorDash’s shares have experienced significant but less spectacular growth. Due to its recent fulfillment of the profitability requirements, the company is now qualified for entrance.
Coinbase Global Inc. (COIN), a smaller company than DoorDash, was also mentioned a lot as a potential competitor but was not chosen this time either. Although Coinbase provides a place to trade cryptocurrencies, the market is subject to a quickly changing regulatory environment. Since the end of 2022, its stock has increased by over 500%.
One problem facing the S&P 500 index committee is that the most visually appealing candidates for inclusion have frequently seen significant stock gains, making them stand out in terms of market capitalization for being excluded from the index. However, equities that soared so quickly could be at danger for volatility.
Super Micro Computer Inc. (SMCI), which was selected to join the S&P 500 at the March 2024 reshuffle, is one example of that from the previous year. Due to worries about the company’s financial management and pressure from competitors in the fiercely competitive server industry, Super Micro’s stock has dropped more than half since the announcement. Additionally prone to large fluctuations, Super Micro’s stock frequently ranks among the index’s top daily movers.
Ahead of the December shakeup, Bernstein analysts pointed out that although new entrants significantly beat the S&P 500 in the year prior to being included in the index, they only see modest outperformance in the five days after the announcement, “with relative returns continuing to trail off postannouncement.”
Because trillions of dollars’ worth of assets are invested in funds that track the S&P 500, stocks typically experience instant boosts after being identified as potential S&P 500 entrants. Shares of the new entrants must be purchased by such index funds.
In fact, DoorDash’s stock was up 6% during Friday’s extended session, demonstrating those instant increases. The stock of Expand Energy was up 2.3%, Williams-Sonoma was up 1.6%, and TKO, the company that owns World Wrestling Entertainment (WWE) and the Ultimate Fighting Championship (UFC), was up 2.4%.
In the meantime, the omitted firms’ stock was declining. During Friday’s extended session, Interactive Brokers’ stock was down 2.6% while AppLovin’s stock was down roughly 4.3%. The stock of Coinbase was down 2.1%.
Before trading begins on March 24, the four newcomers are expected to take the position of BorgWarner Inc. (BWA), Teleflex Inc. (TFX), Celanese Corp. (CE), and FMC Corp. (FMC) in the benchmark index.
