MW S&P 500 changes are due out soon. These AI stocks could join the index.
By Emily Bary
Lumentum and Coherent have market caps of more than $40 billion, well above the threshold for S&P 500 inclusion
S&P Dow Jones Indices is expected to announce new S&P 500 components late Friday.
The upcoming quarterly S&P 500 rebalance could usher in a promotion of sorts for at least one artificial-intelligence highflier.
Two of the leading candidates for entry into the benchmark index SPX are optical-networking companies that have seen their shares explode higher in recent months. Lumentum Holdings $(LITE)$ and Coherent $(COHR)$ both sit in the S&P MidCap 400 index MID but have become vastly "oversized," according to Melissa Roberts, an analyst at Stephens.
S&P Dow Jones Indices can change up index components at various times, including quarterly and at its own discretion. Its next announcement is expected for after Friday's close.
With recent market caps of $42.6 billion and $46.2 billion, respectively, Lumentum and Coherent are two of the largest eligible companies not currently in the index. The fact that they're already in the S&P MidCap 400, however, confers a potential advantage over companies not in that smaller index, Roberts noted.
That's because S&P Dow Jones Indices may see extra value in "migrations" that help balance the various indexes, which are weighted by market cap. Shares of Lumentum and Coherent currently have outsize influence on the midcap index because the companies are so much bigger than the other constituents. Within the S&P MidCap 400, the next largest company by market cap is EchoStar $(SATS)$ at $31 billion.
If selected for the S&P 500, Lumentum or Coherent would join a list of technology companies earning spots in the benchmark index as AI supercharged their businesses. Sandisk $(SNDK)$ made the cut last fall, while Super Micro Computer $(SMCI)$ joined in March 2024.
Roberts said the index committee may be more inclined to go with "migrators" versus new names, in part because there's an active mergers-and-acquisitions climate that should open up more opportunities for S&P 500 changes if member companies get purchased.
"With that in mind and the fact that we have a strong M&A pipeline, they definitely don't have to be as aggressive," she said of the index committee.
But S&P Dow Jones Indices could still tab some fresh names. Roberts flagged Vertiv Holdings $(VRT)$, a $94.6 billion maker of data-center infrastructure, as well as Reddit (RDDT), the $26.9 billion social-media company.
Meanwhile, she noted that Lamb Weston Holdings (LW), Paycom Software $(PAYC)$, Match Group $(MTCH)$, EPAM Systems $(EPAM)$ and Molina Healthcare (MOH) are among the smallest members of the S&P 500 and at risk of demotion to the S&P SmallCap 600 SML. The $22.7 billion market-cap threshold is a requirement for entry into the S&P 500, but companies aren't automatically booted if their market caps drop below that level. S&P Dow Jones Indices only makes a handful of changes each rebalancing period, if at all, but the smallest constituents are always vulnerable.
"There's always a risk that they don't have to make any changes," Roberts said.
-Emily Bary
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 06, 2026 14:40 ET (19:40 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments