AppLovin and Robinhood added to S&P 500
News Summary
Shares of advertising technology company AppLovin and stock trading app Robinhood Markets each jumped about 7% in extended trading on Friday after S&P Global announced their inclusion in the S&P 500 index. The changes will go into effect before the beginning of trading on Sept. 22, with AppLovin replacing MarketAxess Holdings and Robinhood taking the place of Caesars Entertainment. Both companies had previously seen their shares drop after being excluded from past index rebalancings. AppLovin's stock gained 278% in 2023 and over 700% in 2024, though it had only risen 51% year-to-date in 2025. Robinhood has been a favorite among retail investors, particularly during the meme stock phenomenon. Notably, AppLovin earlier this year offered to buy ByteDance's U.S. TikTok business, a deadline for which U.S. President Donald Trump has repeatedly extended.
Background
Inclusion in the S&P 500 index typically leads to a stock price increase for the added companies, as index fund managers are required to purchase shares to reflect the updates. Both AppLovin and Robinhood went public on Nasdaq in 2021 and have experienced stock volatility in previous quarters, partly due to prior exclusions from the index. AppLovin's business focuses on targeted advertising software for mobile apps and games, while Robinhood operates a popular stock trading app, particularly favored by retail investors active in meme stock trading. AppLovin's prior offer to acquire the U.S. TikTok business, and President Trump's ongoing attention to such transactions, also adds an additional layer of market scrutiny to the company.
In-Depth AI Insights
What are the deeper implications of these inclusions for the long-term composition of the S&P 500 and investor sentiment? - The inclusion of AppLovin and Robinhood, representing fast-growing ad-tech and retail brokerage industries respectively, reinforces the S&P 500's preference for 'new economy' growth-oriented and technology-driven companies. - Despite their past volatility, their strong growth rates and market impact (especially Robinhood as a retail investor hub) suggest the S&P committee may be prioritizing market relevance and growth potential over traditional earnings stability and sheer market cap alone. - This could signal a continued trend of the index incorporating companies with disruptive potential or significant market share in high-growth niches, even if accompanied by higher volatility and unique business model risks. For index fund managers, this means deeper portfolio exposure to these emerging trends, potentially offering higher returns but also higher risk. How will AppLovin and Robinhood's stock perform long-term following index inclusion, beyond the initial 'index effect'? - While inclusion typically provides a short-term boost, long-term performance will be dictated by the companies' fundamentals, profitability, and competitive advantages. - AppLovin faces challenges from advertising market cyclicity, privacy policy changes, and intense competition from tech giants. Its potential acquisition of TikTok's U.S. business, if finalized, could offer a new growth catalyst but also brings integration and regulatory risks. - Robinhood must navigate slowing user growth, regulatory scrutiny, and volatile crypto trading volumes. Its ability to diversify offerings and enhance institutional credibility will be key to sustaining its appeal within the index. - Over the long run, both companies need to demonstrate sustained innovation and market share expansion to justify their higher valuations relative to more traditional blue-chip constituents. Does this selection reflect a shift in the S&P committee's preference for specific industries or business models in the current market environment? - The choice of AppLovin and Robinhood over more traditional MarketAxess and Caesars suggests a potential leaning towards companies with high growth and disruptive potential within the digital economy. - AppLovin represents growth in mobile advertising and gaming, while Robinhood embodies the democratization of retail fintech and the power of individual investors. This shift in preference likely reflects a strong market emphasis on innovation and digital transformation, even if these companies may lack longer-term earnings history or present higher volatility. - In the context of President Donald Trump's administration, support for American tech innovation and domestic digital economic development could also be a subtle underlying factor, particularly given AppLovin's intent to acquire TikTok's U.S. operations, aligning with governmental concerns over data sovereignty and national security. This might hint at a 'America First' digital company preference amidst economic nationalism.