Nandini Roy Choudhury, writer
Brief news
- Dell and Palantir both experienced a 7% increase in value after being included in the S&P 500 index.
- Dell will replace Etsy, while Palantir will replace American Airlines in the index.
- Dell’s inclusion marks its return to the benchmark index, while Palantir became a publicly traded company in 2020 and has been generating profits.
Detailed news
In extended trade on Friday, Dell and Palantir both experienced a 7% increase in value following a statement by S&P Global that the companies would be included in the S&P 500 index.
Dell will replace Etsy, and Palantir, a software company, will replace American Airlines, according to a statement. The announcement of the inclusion of companies in the benchmark frequently results in a surge in the value of their shares, as fund managers who monitor the index frequently adjust their portfolios to reflect the new additions.
Dell’s announcement signifies its return to the benchmark index. From 1996 to 2013, the computer and server manufacturer was a constituent. The company was privatized by Silver Lake and its founder, Michael Dell, in 2013. In 2018, Dell resumed its public offerings.
Super Micro Computer, which competes with Dell in the sale of servers for artificial intelligence duties, was admitted to the S&P 500 earlier this year as a result of a historic stock rally that has elevated the company’s market capitalization to over $50 billion. Its value has since been reduced by half.
In 2020, Palantir became a publicly traded company on the New York Stock Exchange after operating as a venture-backed startup for over 15 years. The company began to generate profits in the fourth quarter of 2022. Palantir’s net income for the second quarter, which was $135.6 million, increased from $27.9 million in the same period a year ago. Four consecutive quarters have witnessed an increase in annual revenue growth.
Alex Karp, the CEO and co-founder of Palantir, has established a reputation for fostering patriotism in the technology sector by assisting government and military agencies in the management of their data. He recently stated to The New York Times that Palantir is involved in “the discovery of hidden things.”
In order to be included in the S&P 500, a company must have reported a profit in its most recent quarter and have a cumulative profit over the four most recent consecutive quarters.
“I am interested in profitability for the obvious reasons, but I also believe that we will be in a much stronger position as it becomes apparent that we qualify for participation in S&P,” Karp stated during a conference call with analysts in May 2023.
Dell has been profitable in nearly every quarter since 2019. The stock experienced a 90% increase in 2023 and was up 33% this year prior to the rebalancing announcement. The sales of servers that contain Nvidia graphics processing units, which are capable of managing AI workloads, have been the primary factor driving growth. Dell informed investors on August 29 that the demand for AI servers in the quarter ending August 2 amounted to $3.2 billion, a 23% increase from the previous quarter.
When the index was last rebalanced in June, CrowdStrike, a cybersecurity vendor, was included.
The additions are a more accurate representation of U.S. equities with high market capitalizations, according to S&P Global. The median market capitalization of the companies in the index is approximately $33.5 billion. Dell is valued at over $72 billion, while Palantir has a market capitalization of over $67 billion.
After hours, Workday, an additional software manufacturer, experienced a 2% decline in its stock price. The Bank of America trading division identified Workday and Palantir as its top candidates for S&P inclusion in an email sent on Friday morning.
Source : CNBC News
