S&P 500 Index Inclusion and Its Impact on Tech Stocks Like Robinhood and AppLovin

The S&P 500 index reshuffling in September 2025 has underscored the transformative power of index inclusion for tech stocks, while also revealing the nuanced criteria that govern such decisions. Robinhood Markets (HOOD) and AppLovin (APP) were added to the index on September 22, 2025, triggering immediate market reactions and institutional capital inflows. Meanwhile, MicroStrategy (MSTR), despite its $95.4 billion market cap and Bitcoin-driven strategy, was excluded—a decision that sparked debate about the index’s evolving standards for tech and crypto-related firms [1].

The Capital Flow Windfall for Robinhood and AppLovin

The inclusion of Robinhood and AppLovin in the S&P 500 marked a watershed moment for fintech and app-based platforms. According to a report by Yahoo Finance, the announcement on September 6 sent both stocks surging in after-hours trading: HOOD rose 7.1%, and APP climbed 7.4% [2]. This reaction was driven by the anticipation of mandatory purchases by passive funds, which manage trillions in assets and must rebalance portfolios to align with index changes. For example, BlackRock, Vanguard, and State Street Corporation—whose index-tracking funds collectively hold over $10 trillion—would have been compelled to add HOOD and APP to their portfolios, creating immediate liquidity and upward price pressure [3].

The valuation implications were equally striking. Robinhood’s price-to-earnings (P/E) ratio expanded to 52.27, reflecting investor optimism about its post-pandemic pivot to institutional-grade trading tools [4]. AppLovin’s P/E ratio reached 69.64, a premium that underscores its dominance in mobile advertising and gaming [5]. These multiples, while elevated, are consistent with the S&P 500’s broader tilt toward high-growth tech stocks, which now constitute nearly 30% of the index’s market capitalization [6].

MicroStrategy’s Exclusion: A Cautionary Tale

MicroStrategy’s exclusion, however, highlighted the S&P 500 committee’s caution toward companies with unconventional business models. Despite meeting liquidity and profitability thresholds, MSTR’s stock fell 3.1% after the September 6 announcement, as investors grappled with the index’s decision [7]. The company’s P/E ratio of 16.89, while attractive on paper, was overshadowed by its heavy Bitcoin exposure—nearly 80% of its assets are tied to the volatile cryptocurrency [8].

Analysts suggest that the S&P 500’s “industry balance” criteria played a role. As noted in a report by CoinGape, the index’s secretive selection process prioritizes diversification, and MSTR’s alignment with crypto—a sector still viewed as speculative—may have conflicted with that goal [9]. This exclusion contrasts with the inclusion of crypto-friendly firms like Coinbase in 2024, illustrating the committee’s inconsistent approach to digital assets [10].

Broader Implications for Tech and Institutional Capital

The September 2025 reshuffling reflects a broader trend: the S&P 500’s increasing embrace of tech-driven innovation. Robinhood and AppLovin’s inclusion signals a shift toward platforms that redefine financial access and digital engagement. For institutional investors, the event reinforced the importance of index-linked flows. As Morgan Stanley noted, newly added stocks typically see a 15–20% increase in trading volume post-announcement, driven by algorithmic rebalancing [11].

Yet the exclusion of MSTR raises questions about the index’s ability to adapt to disruptive technologies. With Bitcoin’s market cap surpassing $1 trillion and institutional crypto adoption accelerating, the S&P 500’s reluctance to include firms like MSTR may create a misalignment between the index and market realities [12]. This tension could intensify as more tech companies integrate blockchain and AI into their core operations.

Conclusion

The S&P 500’s September 2025 changes underscore the dual-edged nature of index inclusion. For Robinhood and AppLovin, the addition brought immediate capital inflows and valuation boosts, validating their roles in the tech ecosystem. For MicroStrategy, the exclusion highlighted the lingering skepticism toward crypto-centric models—even as the broader market increasingly embraces digital assets. As the index continues to evolve, investors must weigh not just a company’s fundamentals but also its alignment with the S&P 500’s opaque, yet powerful, selection criteria.

Source:
[1] Yahoo Finance - Robinhood, AppLovin jump as S&P 500 reshuffle boosts index entrants [https://www.investing.com/news/stock-market-news/robinhood-applovin-jump-as-sp-500-reshuffle-boosts-index-entrants-4227759]
[2] Yahoo Finance - Robinhood to join S&P 500 in watershed moment for US fintech sector [https://finance.yahoo.com/news/applovin-robinhood-emcor-set-join-214758764.html]
[3] MarketBeat - AppLovin Dips on S&P 500 Snub, Morgan Stanley Lifts Target Anyway [https://www.marketbeat.com/originals/applovin-dips-on-s-and-p-500-snub-morgan-stanley-lifts-target-anyway/]
[4] MarketWatch - Robinhood Markets Inc. Stock Quote [https://www.marketwatch.com/investing/stock/hood]
[5] GuruFocus - AppLovin (APP) Set to Join the S&P 500 Index [https://www.gurufocus.com/news/3097171/applovin-app-set-to-join-the-sp-500-index]
[6] Barron’s - S&P 500 stocks: List of additions and removals in 2025 [https://finance.yahoo.com/news/p-500-stocks-list-additions-093000116.html]
[7] CoinGape - Expert Blames 'Secret Committee' for Rejecting MSTR [https://coingape.com/expert-blames-secret-committee-for-rejecting-mstr-stock-inclusion-to-sp-500/]
[8] Investing.com - MicroStrategy (MSTR) Stock Price Today [https://www.investing.com/equities/microstrategy-inc]
[9] CoinGape - Michael Saylor's Strategy Fails To Make S&P 500 Listing [https://coingape.com/michael-saylors-strategy-fails-to-make-sp-500-listing/]
[10] Morningstar - Coinbase's stock is up 44% this month as Wall Street projects amazing profit growth [https://www.morningstar.com/news/marketwatch/20250627249/coinbases-stock-is-up-44-this-month-as-wall-street-projects-amazing-profit-growth]
[11] MarketBeat - AppLovin Dips on S&P 500 Snub, Morgan Stanley Lifts Target Anyway [https://www.marketbeat.com/originals/applovin-dips-on-s-and-p-500-snub-morgan-stanley-lifts-target-anyway/]
[12] GuruFocus - MicroStrategy (MSTR) Eyes S&P 500 Inclusion Amid Bitcoin Strategy Success [https://www.gurufocus.com/news/3095702/microstrategy-mstr-eyes-potential-inclusion-in-sp-500]