To The Moon

Disclaimer: This article is for investor education only and does not constitute investment advice. The capital flow effect from index rebalancing is a short-term trading shock and does not alter the fundamentals of listed companies.

1. When does the Nasdaq 100 rebalance? How many times per year?

The Nasdaq 100 adopts a dual mechanism: quarterly review + annual reconstitution.

• Quarterly rebalancing (3 routine weight adjustments annually: March, June, September) Quarterly reviews are conducted in March, June and September, primarily to adjust constituent weights. Constituents may be added or removed under certain circumstances. Adjustments are announced in advance and take effect before the market opens on the third Monday of the respective month. This September rebalance takes effect pre-market on September 21, with the core change being weight adjustments for securities including SPCX.

• Annual reconstitution (major annual overhaul in December) December hosts the Nasdaq 100’s most important annual reconstitution, effective after market close on the third Friday of December. This is the main window for bulk additions and removals of index constituents; most large-scale constituent swaps happen in December.

✅ Quick summary: There are four index reviews per year (Mar/Jun/Sep/Dec), including three quarterly weight rebalances and one large-scale annual reconstitution.

2. What are the inclusion and exclusion criteria for the Nasdaq 100?

Basic eligibility requirements for Nasdaq 100 inclusion

• Listed on the Nasdaq stock exchange; financial stocks are excluded (banks, insurers and other financial firms cannot join the Nasdaq 100).

• Market cap threshold: Meet the minimum free-float market capitalisation requirement.

• Liquidity: Satisfy requirements for average daily trading volume and trading value.

• Listing tenure: Meet the minimum listing period requirement.

• Compliance: Maintain exchange listing standards with no material delisting risks.

Weight calculation rules

The Nasdaq 100 is a modified market-capitalisation weighted index, not a simple total market cap weighted index. Weights are calculated based on free-float market capitalisation.

Key case study: SpaceX (SPCX) joined the Nasdaq 100 in July. However, a large volume of shares were subject to lock-up restrictions at that time, resulting in limited free-float shares and an initial weight of only 1.28%. In this September rebalance, lock-up periods expired and free-float shares increased substantially. Its weight rose directly to 2.82%, forcing index funds to make passive purchases.

Removal rules

• Sustained market capitalisation below the threshold;

• Merger, acquisition, delisting or suspension of listing;

• Breach of exchange listing rules;

• Low ranking during the annual review, leading to removal in the December annual reconstitution.

Supplementary note: Additions and deletions for S&P indices (S&P 100, S&P 500) are determined via combined qualitative and quantitative review by the S&P Index Committee. Beyond market cap and liquidity, the committee also assesses sector representation, corporate earnings stability and other factors — selection is not based purely on market cap ranking.

3. Changes effective Sep 21: Additions / Removals (Nasdaq & S&P adjustments in tandem)

There are no new additions or deletions to the Nasdaq 100 in this round. The core action is weight re-evaluation, with the biggest change being the weight hike for SpaceX (SPCX). The S&P 100 and S&P 500 carry out constituent additions and removals simultaneously.

✅ Key Nasdaq 100 change SpaceX ( $SpaceX(SPCX)$ ): Weight raised from 1.28% to 2.82% Context: It officially joined the index in July with most shares locked, leading to low free-float ratio. Lock-ups expired in September and unlocked free-float shares, requiring passive index capital to increase holdings accordingly. Scale context: Over 200 investment products globally track the Nasdaq 100 with total AUM exceeding US$800 billion. The weight increase triggers billions of US dollars in passive buying demand.

✅ New additions to $S&P 100(OEX)$ Palo Alto Networks (PANW), Arista Networks (ANET), SanDisk (SNDK), Dell (DELL)

Removed constituents: $Honeywell Aerospace Inc(HONA)$ , $Nike(NKE)$ , $Colgate-Palmolive(CL)$ , etc.

✅ New additions to $S&P 500(.SPX)$ Everpure, Bloom Energy (BE), Illumina (ILMN)

4. Performance and potential impact analysis for newly added constituents

1) Short-term logic: One-off buying pressure from passive capital

Index funds and ETFs must replicate the index strictly. Before the rebalance takes effect, funds need to purchase newly added securities or increase holdings for stocks with higher weights under the new index weightings. This creates short-term demand pressure, commonly known as the “index inclusion premium”.

• SpaceX (SPCX): Its near-doubled weight forces large-scale buying from Nasdaq 100 ETFs and index products, bringing short-term liquidity premium. The market has already priced in this expectation after the announcement.

• New S&P 100 entrants: $Arista Networks(ANET)$ , $Palo Alto Networks(PANW)$ , $Dell Technologies Inc.(DELL)$ and $SanDisk Corp.(SNDK)$ are all players in AI infrastructure, cybersecurity and compute hardware — core AI theme stocks. Combined with incremental passive index capital, they benefit from favourable short-term fund flows.

• New S&P 500 entrants: $Bloom Energy Corp(BE)$ , $Illumina(ILMN)$ (genomics sequencing), $Everpure(P)$ (water treatment). Passive inflows will deliver short-term liquidity tailwinds.

2) Critical reminder: This is a short-term capital effect, NOT an improvement in company fundamentals

Index inclusion does not equal better corporate fundamentals. Securities qualify only by meeting market cap and liquidity rules; inclusion does not signal improved profitability or product competitiveness.

• Premiums are often priced in in advance: Arbitrage capital tends to buy ahead of the effective date after the index announcement to anticipate passive fund inflows. On the effective date, the positive catalyst is often already realised, triggering the classic “buy the rumour, sell the fact” dynamic.

• Downside pressure: Stocks removed from the index face concentrated selling by index funds and may come under short-term price pressure.

3) Medium & long-term impacts

Inclusion in major broad-based indices delivers sustained long-term passive allocation, boosting stock liquidity, institutional ownership and research coverage by global institutional investors. For names like SpaceX, the index inclusion and weight upgrade allows massive global holders of Nasdaq ETFs to gain indirect exposure to aerospace and satellite internet themes.

5. Common investor misconceptions

❌ Myth 1: Share prices will always surge once added to an index

✅ Fact: The capital effect is purely short-term supply and demand. Broader market weakness or company-specific fundamental negatives can fully offset the index inclusion tailwind.

❌ Myth 2: Nasdaq 100 only rebalances in December every year

✅ Fact: Quarterly reviews are held in March, June and September, focusing on weight adjustments. SpaceX is a perfect example: it entered the index in July, and only unlocked free-float shares and received the weight upgrade in September.

❌ Myth 3: Higher weight = a sharp rise in the company’s market cap

✅ Fact: SPCX’s weight increase mainly stems from expired lock-ups and expanded free-float share count, rather than pure share price appreciation.

6. Conclusion

The September 21 index rebalance marks a major event in US passive investing. The standout Nasdaq 100 development is SpaceX’s doubled weight, while the S&P 100 and S&P 500 add a cohort of AI hardware, cybersecurity and life science firms. At its core, index rebalancing is simply a rebalancing rule for passive funds. It creates short-term price noise, while long-term performance is ultimately driven by corporate fundamentals.

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