Robinhood and AppLovin Soar After S&P 500 Inclusion, Strategy Falls After Missing Out.

Robinhood and AppLovin rallied in postmarket trading after being added to the S&P 500 Index, replacing MarketAxess Holdings and Caesars Entertainment. The inclusion in the index is expected to boost the companies' visibility and attract more investors. Strategy shares fell after missing out on the inclusion.

Robinhood Markets and AppLovin saw their shares jump approximately 7% in extended trading on Friday after being announced as additions to the S&P 500 Index. The inclusion will replace MarketAxess Holdings and Caesars Entertainment, effective before the start of trading on September 22. This move is expected to enhance the companies' visibility and attract more investors.

The decision to include Robinhood and AppLovin comes after the S&P Global committee's rebalancing of the index. The inclusion of these high-growth firms reflects the index's evolving composition and its continued focus on technology and innovation. Both companies have been significant players in their respective sectors, with Robinhood becoming a favorite among retail investors and AppLovin's software bringing targeted ads to mobile apps and games.

For Robinhood, the inclusion in the S&P 500 validates its role as a bridge between retail investors and digital assets. Despite a high price-to-earnings (P/E) ratio and a discounted cash flow (DCF) valuation below its market price, the stock saw a 7% surge in after-hours trading. The company's Q2 2025 financial results, which showed a significant increase in crypto trading revenue, likely contributed to its inclusion.

AppLovin, on the other hand, has seen its shares gain 278% in 2023 and over 700% in 2024. Its AI ad-tech business has attracted upgraded analyst targets, and the company's offer to buy the U.S. TikTok business from ByteDance has further elevated its profile. The inclusion in the S&P 500 is expected to provide AppLovin with increased liquidity and institutional ownership.

MarketAxess and Caesars Entertainment, which are being replaced by Robinhood and AppLovin, respectively, saw their shares fall. MarketAxess, which specializes in fixed-income trading, has fallen 17% year to date, while Caesars, which runs hotels and casinos, is down 21%.

The S&P 500's inclusion mechanism has long acted as a gravitational force for capital, with passive funds and institutional investors compelled to rebalance portfolios to mirror the index. This activity typically drives short-term price surges, as seen in the 7% after-hours jumps for Robinhood and AppLovin. However, the magnitude of these effects has diminished over decades, with abnormal returns shrinking from 7.4% in the 1990s to near-zero in the 2010s.

For retail investors, index inclusion acts as a signal of validation, boosting speculative trading activity and attracting more investors. The inclusion of Robinhood and AppLovin reflects broader market dynamics, with the S&P 500's "Magnificent Seven" now dominating 32% of the index.

The recent additions of these high-growth, speculative firms reveal how structural shifts in investor behavior and market structure continue to amplify the index’s influence. While historical patterns suggest the “S&P 500 Inclusion Effect” has weakened over time, the recent additions of Robinhood and AppLovin demonstrate that the index’s influence remains pronounced.

References:
[1] https://www.cnbc.com/2025/09/05/applovin-robinhood-sp-500.html
[2] https://www.ainvest.com/news/500-index-inclusion-implications-robinhood-digital-asset-firms-2509/
[3] https://www.ainvest.com/news/impact-applovin-robinhood-500-inclusion-market-dynamics-retail-investor-behavior-2509/