SpaceX will be twice as influential as Nvidia and Apple combined. That is not a figure of speech. The Nasdaq 100, which most people own through QQQ, will carry a 15% weighting in SpaceX. Nvidia sits at 8%. Apple sits at 7%. One company with no public earnings history will be a bigger driver of that index than the two largest names in it put together.
It helps to be clear about what the Nasdaq 100 is. It is the top 100 Nasdaq firms excluding financials, weighted heavily toward technology and the AI industrial revolution. The people who own it own it because they believe that revolution is in its early stages and has many years to go. The people who do not believe that never buy it in the first place. This is a self-selected group of holders, and they are about to get a much larger dose of exactly what they signed up for.
That is a recipe for volatility. These stocks are volatile to begin with, and we are at all-time high valuations. Last Friday the whole thing came down, and plenty of people believe investors liquidated existing positions to make room for SpaceX. That may or may not be true. What is not in dispute is that the index now carries a bigger question mark, because nobody knows what SpaceX revenues and earnings look like in a month, a quarter, or a year.
The practical consequence is simple. The volatility of the Nasdaq 100 is going up. If you do not like volatility, this is not the index for you, and I would say so plainly. If you do like it and you believe in the industrial revolution, weakness rather than strength is where I would rather be adding, and that is how I am approaching it for our own book. I could be wrong on the timing. I am not confident anyone can price this name properly in the first month of trading.
