The videogame company EA is set to be taken private, opening the door for a new company to join the benchmark index
Bloom Energy has been a major beneficiary of the broader market's focus on artificial intelligence.
A coming opening in the S&P 500 could be filled by an energy company that has massively benefited from demand for new data centers.
Electronic Arts $(EA)$ is set to become a private company as soon as next Tuesday after regulators cleared its acquisition by a consortium led by Saudi Arabia's Public Investment Fund. The videogame company behind series like The Sims and Madden NFL agreed to be bought for $55 billion, which will leave a vacancy in the S&P 500 SPX.
A replacement is likely to be announced by S&P Dow Jones Indices as soon as Friday after the market closes, according to Stephens analyst Melissa Roberts. Index inclusion typically pushes passive investors and funds tracking the S&P 500 to buy shares to match its holdings.
Roberts said a few different companies could plug the index's EA-shaped gap, noting that there are 14 eligible new additions. Chief among them is Bloom Energy $(BE)$, a renewable-energy company that excited investors earlier this week with strong quarterly earnings.
It reported sales that topped $1 billion, with CEO and founder KR Sridhar labeling Bloom a "standard for AI onsite power." Bloom stock has surged 144% year-to-date, and more than 477% over the last 12 months.
Bloom, with a market capitalization of $61 billion, could be a "formidable contender," Roberts said in a client note. She noted the potential for four days of buying demand if the company is added to the S&P 500.
Another option is the social-media company Reddit (RDDT), which on Thursday delivered an earnings beat quickly overshadowed by "choppy" search referrals. The stock was down over 21% in early trading on Friday.
Roberts' other top picks include semiconductor company Astera Labs (ALAB) and the financial-services firm Rocket Companies (RKT).
She also noted that smart-home-products maker Resideo Technologies $(REZI)$ is spinning out ADI Global Distribution (ADIG.WI), which will begin trading next week, possibly making it a candidate for S&P Small Cap 600 SML inclusion.
Roberts mapped out a scenario in which biotechnology firm Illumina (ILMN) replaces EA in the S&P 500, while Corcept Therapeutics $(CORT)$ is moved to the S&P MidCap 400 MID index. That would leave open a spot for ADI Global Distribution in the S&P 600.
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-William Gavin
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