SpaceX will officially join the Nasdaq-100 on Tuesday, and investors holding some funds tied to the index will end up exposed whether they like it or not.
Mutual and exchange-traded funds with a collective $800 billion in assets under management that track Nasdaq's flagship tech index, including the popular Invesco QQQ ETF, are set to buy SpaceX shares at Monday's closing price in order to mirror the index's performance.
That comes after Elon Musk's artificial-intelligence and-rocket-making company was fast-tracked into the Nasdaq-100 under new rules that aim to include newly public megacap companies sooner. Here's what you need to know:
SpaceX will be a small component, for now
Even though SpaceX's $2.1 trillion market cap makes it one of the most-valuable companies in the U.S., it won't enter the cap-weighted index as one of the top components.
That's because SpaceX sold less than 5% of its total shares in last month's public offering. Combined with lock-up rules that prevent employees from selling the stock for several months or more, that means a small fraction of the company's shares are currently circulating publicly.
The Nasdaq adjusts index weights by a company's so-called free-float, or the number of shares available to trade publicly, capping the weight at three times a company's float-adjusted market capitalization. For SpaceX, that means it will initially be treated more like a $300 billion company than a $2 trillion one, and have an initial index weight of less than 1%.
QQQ is the biggest fund adding SpaceX, but not the cheapest
With roughly half a trillion dollars in assets, Invesco's QQQ ETF is the biggest fund tracking the Nasdaq-100 and the fifth-largest ETF overall. A long-running marketing campaign has made QQQ a favorite fund among individual investors, but those seeking the lowest fees now have cheaper options.
State Street's newly launched SPDR Portfolio Nasdaq 100 fund is charging holders a 0.1% annual fee on their assets -- or $10 on a $10,000 investment -- undercutting QQQ's 0.18% fee. A new BlackRock fund tracking the index is set to launch shortly, and Invesco also offers the QQQM ETF at a 0.15% annual fee.
Index inclusion can boost a stock
SpaceX advisers reached out to index providers earlier this year seeking early inclusion for a reason: The trillions of dollars parked in passive, index-tracking funds creates automatic demand for included stocks, an important source of support for share prices.
When an ETF has more buyers than sellers, the fund manager creates shares to fill that demand. QQQM, for instance, has reported a net inflow of $16 billion so far this year, meaning the fund has purchased billions of dollars in additional shares of the companies it tracks.
The opposite is true if a fund has net outflows, of course, but U.S. equity ETFs have been posting net inflow records year after year.
But gains are far from guaranteed
As employee lockup periods end over the next year, index funds are likely to help absorb some of the selling from employees looking to cash out -- a phenomenon that analysts say has weighed on shares of newly public companies like Facebook in the past.
Still, the float adjustments are keeping a lid on how much SpaceX Nasdaq-100 funds will need to buy, and the company won't be joining the most widely tracked index, the S&P 500, for at least a year.
While index inclusion can provide important support for a stock in its early days, analysts said the company's financial performance and the number of investors who want to buy its shares directly are likely more important drivers of long-term performance.
-- This explanatory article may be periodically updated.
Write to Jack Pitcher at jack.pitcher@wsj.com
(END) Dow Jones Newswires
July 06, 2026 05:30 ET (09:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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