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Financial experts from Warren Buffett on down often urge retail investors to own a portfolio spread across the broad U.S. stock market. And if you own a fund that tracks the S&P 500, you more or less have just that — a who's who of the largest stocks available on U.S. exchanges. But what happens when a new bombshell enters the proverbial villa?
Index fund investors may be pondering that exact question, given the news that SpaceX CEO Elon Musk said he's considering a tie-up with Tesla . When SpaceX reported its third-quarter financial results last week, Musk said on the earnings call that he'd consider a combination with the Austin, Texas-based electric car maker, in what would be the largest merger in history. Adding fuel to this quandary, on Monday, AI firm Anthropic filed an S-1 with the Securities and Exchange Commission, signaling the company's intention to go public.
Both could be huge companies. Doing a little back-of-the-napkin math, SpaceX and Tesla sport market capitalizations, calculated by multiplying share price by shares outstanding, of $2 trillion and $1.55 trillion, respectively. Smash those together, and a theoretical $3.55 trillion company would be the fifth-largest company on the market.
Experts say Anthropic could seek a valuation between $1.5 trillion and $2 trillion at its offering, which at current prices could make it between the world's eighth- and twelfth-largest firm. But if you hold an S&P 500 fund, that doesn't necessarily mean you're about to have new top-10 holdings. Here's why, and why index mechanics matter for your portfolio.
How stocks get added to indexes It's easy to think of the S&P 500 as a very straightforward, math-based index. If you assumed the index merely held the 500 largest stocks on the market, weighted by market size, you'd be mostly right. But if you're already invested in an S&P 500 fund — and many people are; S&P Dow Jones Indices estimated about $16 trillion was invested in products designed to track the S&P 500 as of year-end 2025 — you may have noticed that SpaceX isn't included in the portfolio.
That's because S&P generally has a 12-month waiting period for newly public stocks to join the index, meaning that Musk's rocket firm will have to wait until June 2027 to be considered for inclusion. Anthropic could face a similar waiting period before S&P's index committee considers the stock for admission. As for a potential Musk-led supercompany, experts say its inclusion and weighting in the index would come down to several factors, including the mechanics of the merger and the percentage of shares of the combined company made available to the public.
A representative from S&P Dow Jones Indices told CNBC Make It that the firm does not comment on hypothetical scenarios or any company's eligibility for index inclusion. The firm's methodology states that each merger and acquisition is reviewed on a case-by-base basis. If an acquiring company is in the S&P 500 and acquires a firm not in the index, that firm generally stays in the index, though S&P could remove it if the transaction affects its eligibility.
Non-members that acquire members can be added, too, provided they meet other eligibility criteria, at the index committee's discretion. What it all could mean for your portfolio It remains to be seen if and when Anthropic or a Tesla/SpaceX combo would be added to the S&P 500. But if they eventually make it into an index fund you own, experts say there are a couple of key things to consider.
One would be a bump in exposure to Musk-led firms, meaning that more of your portfolio could be tied to the tech CEO's vision of the future, says Seth Goldstein, a senior equity analyst at investment research firm Morningstar. "For direct holders of Tesla or SpaceX, you're holding the stock because you believe in Elon Musk's vision and believe that he can turn seemingly conceptual products into a reality," Goldstein says. "Whether that is cars that can drive themselves [or] humanoid robots that can be useful, he has these sort of grand visions for future technologies, and he has the ability to bring them into real products." Another consideration is concentration risk — the idea that much of the fate of a particular portfolio is tied to a small number of investments.
Nearly 40% of assets in any given S&P 500 fund are currently invested in the index's top-10 holdings, many of which are directly or tangentially tied to the proliferation of artificial intelligence. From December 1965 through March 2026, the S&P 500's top-10 constituents accounted for 23% of the index, on average, according to research from T. Rowe Price .
Additions of a SpaceX/Tesla firm or of Anthropic could further tilt the S&P 500 toward tech and AI, and, more broadly, toward companies whose stocks have already seen major run-ups, says Brent Leadbetter, head of RAFI distribution at investment research firm TMX VettaFi. "We are wary of concentration. By definition, the shares of firms that reach the top of cap-weighted indices have appreciated at a faster rate than the firms they have surpassed," Leadbetter says.
"These recent winners are often expensive as a result. Investing in expensive companies is too often a way for investors to chase strong past returns only to realize modest future returns."
Source: CNBC
