Dell and Palantir join S&P 500, sparking stock surge

Technology giants Dell and Palantir are set to join the prestigious S&P 500 index, a move that sent their shares soaring 7% in after-hours trading on Friday. The announcement marks a significant milestone for both companies and reflects their growing prominence in the tech industry. According to the official statement, Dell is replacing American Airlines, while Dell is set to take the place of Etsy in the index.

For Dell, the announcement marks its grand return to the S&P 500 after a decade-long absence. The company was previously a constituent of the S&P 500 from 1996 until 2013 when founder Michael Dell and private equity firm Silver Lake took it private. Dell returned to public markets in 2018 and has been enjoying strong performance recently due to the increasing demand for servers equipped with Nvidia GPUs, particularly for handling artificial intelligence (AI) workloads. The company reported $3.2 billion in AI server demand in the quarter ending August 2, a 23% increase from the previous quarter.

Palantir, on the other hand, is making its debut in the S&P 500. The data analytics firm, co-founded by CEO Alex Karp, went public in 2020 and has experienced rapid growth in recent years, driven by its partnerships with government agencies and the increasing demand for its data-driven solutions. In the second quarter of 2023, Palantir posted a net income of $135.6 million, up from $27.9 million the year before.

Both companies have also enjoyed strong stock performance in recent times, further solidifying their eligibility for the S&P 500. Dell shares, for instance, jumped 90% in 2023 and were up 33% this year before the rebalancing announcement. Its market cap is currently valued at over $72 billion, while Palantir stands at $67 billion. By contrast, the median market cap for S&P 500 companies is around $33.5 billion.

The addition of Dell and Palantir in the index follows other notable entrants like Super Micro Computer and CrowdStrike, which have capitalized on AI trends. However, the news comes as a disappointment to other potential candidates like Workday, which saw its shares dip 2% after being overlooked for inclusion.