Dell and Palantir to join S&P 500; shares of both jump

Technology

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Alex Karp, CEO of Palantir Technologies, speaks at the World Economic Forum in Davos, Switzerland, Jan. 18, 2023.
Arnd Wiegmann | Reuters

Dell and Palantir shares both surged about 7% in extended trading on Friday after S&P Global announced that the two technology companies would join the S&P 500 U.S. stock index.

Palantir will take the place of American Airlines, and Dell is replacing Etsy, according to a statement.

This won’t be Dell’s debut in the index. The computer and server maker was a constituent from 1996 to 2013, as founder Michael Dell and private-equity firm Silver Lake took the company private. Dell went public again in 2018.

Super Micro Computer, which competes with Dell in selling servers for AI workloads, joined the S&P 500 earlier this year following a historic rally in the stock that has pushed the company’s market cap past $50 billion. Its value has since been sliced in half.

After operating as a venture-backed startup for over 15 years, Palantir went public on the New York Stock Exchange in 2020, and in the fourth quarter of 2022, the company started posting profits. In the second quarter, Palantir’s net income totaled $135.6 million, up from $27.9 million in the same period a year earlier. Revenue growth year over year has accelerated for four quarter in a row.

Palantir’s iconoclastic CEO, Alex Karp, has gained a reputation for helping companies and government agencies manage their data. He recently told The New York Times that Palantir is engaged in “the finding of hidden things.”

Companies must deliver profit in the most recent quarter to join the major index, and the sum of earnings must be positive in the four most recent quarters.

“My interest in profitability is for obvious reasons, but it’s also, I think, we’ll just be in a much stronger position as it becomes clear that we qualify for participation in S&P,” Karp told analysts on a conference call in May 2023. “And a lot of people look at us afresh, anew, and we’ll begin to look closer at our strengths.”

Dell has been profitable almost every quarter since 2019. Shares of Dell jumped 90% in 2023, and they were up 33% before the rebalancing announcement. Investors have become excited about growth in sales of servers containing Nvidia graphics processing units that can handle artificial intelligence workloads. Dell told investors last week that it has seen $3.2 billion in AI server demand in the quarter ended Aug. 2, up 23% from the prior quarter.

Cybersecurity vendor CrowdStrike was added to the index during the previous rebalancing, in June.

Shares of companies added to the benchmark often rally after the announcement because fund managers who track the index regularly update their portfolios to mirror the additions.

The additions are a better reflection of U.S. stocks with high market capitalizations, S&P Global said. The median market cap of companies in the index is about $33.5 billion. Palantir has a market cap of over $67 billion, while Dell is valued at over $72 billion.

— CNBC’s Ari Levy contributed to this report.

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