If you own a Nasdaq-100 index fund, you now own a slice of SpaceX whether you wanted it or not. That’s the reality The Verge AI dug into this week, and it matters far beyond Elon Musk fans. The bigger story is what happens when trillion-dollar private companies start fast-tracking themselves into the passive funds that hold most Americans’ retirement money.
Here’s what changed. Shortly before SpaceX went public, Nasdaq rewrote its rules so a large newly public company can join the Nasdaq-100 on its 15th day of trading. According to The Verge AI, SpaceX itself requested that rule change, as Reuters reported. When the company joined on July 7th, index funds had no choice. They had to buy in.
Why this is a big deal now
SpaceX isn’t a one-off. It’s the opening act. Anthropic and OpenAI are both expected to go public later this year, which means the two biggest names in AI could soon land in the same index funds that sit inside 401(k)s and pension plans. The mechanics being tested on SpaceX are a preview of how AI’s mega-IPOs will get absorbed into everyday portfolios.
That’s the part worth paying attention to. Passive investing crossed a threshold in 2024, when assets in index funds outpaced actively managed funds, per State Street’s Elise Ryan. So the rules governing what gets added to an index now shape where a huge share of retirement capital flows automatically.
What the expert actually said
The Verge AI took the smart step of asking Burton Malkiel, the economist whose 1973 book A Random Walk Down Wall Street helped launch index investing in the first place. His take on SpaceX the stock is blunt:
“If I were buying individual stocks, I would think twice about buying SpaceX, which is tremendously overhyped.”
But, and this is the key point, he says SpaceX is not a reason to avoid index funds. His logic holds up.
“A very small minority of stocks are responsible for the whole return, and experts can’t pick them any better than the index as a whole,” Malkiel said. Because Nasdaq adjusts for the fact that SpaceX floated less than 5 percent of its shares, the company gets treated like a much smaller one inside the index. One overhyped name doesn’t sink a basket of a hundred.
The real concern isn’t the price
The governance structure is where the pushback lands. The CEO of CalPERS and the New York state and city comptrollers sent SpaceX a sharp letter over its “novel and extreme governance structure.” Translation: Musk holds the majority of voting rights, shareholders can’t meaningfully influence decisions, and SpaceX has limited investors’ ability to sue.
So passive investors get exposure to a famously volatile founder with almost no way to push back. What stands out here is the mismatch. Index funds sell stability and low drama. Musk brings the opposite, and now it’s baked into a benchmark millions hold by default.
What to watch and what to do
The next pressure point is mid-August. SpaceX’s second-quarter results are expected then, and 180-day lockups will let employees sell more shares than the IPO itself offered, notes Bloomberg’s Matt Levine. More shares in circulation could give SpaceX a bigger footprint in these funds, though heavy selling usually pushes the price down. Short sellers are already circling.
Practical takeaways:
- Don’t panic-sell your index fund. Malkiel’s core argument stands. Diversification is doing its job, and SpaceX is weighted small.
- Know what you own. If you hold a Nasdaq-100 tracker, you now have SpaceX exposure, and OpenAI or Anthropic could follow.
- Watch the governance trend, not just the ticker. Founder-controlled, litigation-limited structures entering public benchmarks is the pattern to track as AI IPOs arrive.
- Expect August turbulence. Lockup expirations plus earnings could move the stock on mechanics alone, not news.
The SpaceX inclusion is a stress test for how index funds handle a new class of giant, founder-dominated companies. AI’s biggest names are next in line. For more detail on the mechanics, the full breakdown is worth reading at the original source.