Also the S&P criteria have been revised multiple times, it's not some sacred unchangeable document.
The purpose of the S&P 500 is to be the "best single gauge of U.S. large-cap equities". That's direct from their website. I never dispute this.
I dispute the fact they claim to be the best benchmark of large-cap U.S. equities, yet have rules that (currently) exclude large-cap equities like SpaceX, OpenAI, or Anthropic.
But at a fundamental level, the S&P500 index exists to track the market. It was created decades before passive investing even existed. These companies are all large enough to qualify as major members of the index. If S&P started arbitrarily excluding parts of the market they find uninvestable, then that's compromising the integrity of the index, and defeats the purpose of the index entirely.
Reading this thread, there is so much confusion happening.
No, it exists to track a subset of the market based on specific criteria and weights. It's not even based on the market cap of included companies directly.
'S&P Total Market Index' exists to track the market.
> qualify as major members of the index
Not based on the inclusion criteria.
AND even if that were changed they wouldn't be near the top anyway, despite the trillion dollar valuations initially they wouldn't even be in the top 20 by weight.
> and defeats the purpose of the index entirely.
The index has operated based on specific rules defining inclusion criteria for a while. Can we just conclude that it did not become the most popular index despite never being designed to track the full market or be based directly on total market caps.
After all it's the people advocating the inclusion of these companies are advocating an arbitrary modification to the rules just to get them in.
On your claim that these companies "wouldn't be in the top 20 by weight": as I addressed to you other times in this thread, SpaceX float 1 year after IPO would be 50%, giving it an index weight of $800 billion. That places it easily in the top 20 large-cap U.S. companies. The article linked has a chart of forecast free float. Your claim is false.
https://www.economist.com/finance-and-economics/2026/06/01/c...
On "arbitrary modification" of rules: every criterion in the index was itself added or revised at some point. The profitability requirement, the float threshold, the dual-class share exclusion then reinclusion. All these rules were modified. If all rule changes are "arbitrary," so are the existing rules. The only meaningful standard for evaluating a rule change is whether it better serves the index's stated purpose.
The stated purpose of the S&P500 is to be the "best single gauge of U.S. large-cap equities." A company with a $1.75T market cap that ranks in the top 5 by size in the US is, by definition, large-cap. Excluding such a large company is contrary to the stated purpose of the index.
But they haven't started arbitrarily excluding parts of the market they find investable: on the contrary you are demanding they start arbitrarily change a long established and pretty basic rule to arbitrarily include pre-profit companies. Criteria on non market cap factors including positive earnings and liquidity are defined explicitly on their website along with the subjective "best gauge", which is entirely compatible with the idea it's a better gauge of large market cap company performance if it only includes companies whose market cap is supported by having given the bare minimum indication their business model can be financially sustained, not the ventures whose potential is most hyped[1]
[1]which obviously applies to OpenAI and Anthropic to a greater extent than SpaceX which actually achieved positive earnings as a private company before it pivoted to a model which bankrolls other Elon ventures and ambitions and needed to IPO as a result.
Amazon is infamous for having positive cash-flow yet running near-zero GAAP earnings for nearly two decades, because they reinvested absolutely all profits into the business. They were famously unprofitable, by choice of Jeff Bezos, and he created one of the most successful businesses ever. Under your logic, Amazon didn't belong in the index for most of its most important growth years. Only when it became GAAP profitable, it was allowed to enter.
SpaceX is cash-flow positive in its core launch business. OpenAI and Anthropic have tens of billions in revenue. These companies have found product-market-fit, and clearly demonstrate working business models. But neither of these companies satisfy one specific accounting metric that the S&P 500 requires for inclusion, so they get shafted.
The market has already priced these companies at giga-cap levels, these are some of the largest companies ever created, and that is a clear signal of something. The benchmark index should include these companies in some form, rather than gate them behind an antiquated metric.
Sure, some companies which vastly outspent competitors on growth became very successful profitable midcaps and joined the relevant indices when they did, but everyone else waited their turn (including the ones that never became profitable midcaps because the money tap was their moat)
The benchmark has much more use than just a list of stocks passive investors should blindly follow.
Right here:
> Because the index needs accuracy. If a company is 1-2% of the total US market cap and not included in the index, then the index is wrong right now.
If it's not a total US market index, then why is the index wrong to not include it?
Edit: and then again here:
> But at a fundamental level, the S&P500 index exists to track the market.
Here I once again agree with you in part, and disagree in part.
The S&P 500 should reflect the actual market. That is, the actual market of publicly-traded companies with legal requirements for transparent accounting and reasonable expectations of future positive cash flows.
As you wrote yourself (https://news.ycombinator.com/item?id=48408363), "These [mega-cap IPO] companies will likely never meet S&P profitability inclusion criteria for the next 5 years."
At this point in time, I don't think it's reasonable to expect future positive cash flows from SpaceX or Anthropic. There are indeed some reasons to suspect that there won't be future positive cash flows from them.