SpaceX Entry Sparks Index Reshuffle Amid Rising Concentration

When SpaceX debuted on the Nasdaq in June 2026, it had a significant impact on Wall Street’s key indexes, leading to a reevaluation of market concentration metrics and index design methodology due to its massive size.

SpaceX Joins Top 10 Mega-Cap Index

The reconstitution of the Morningstar Market Indexes on September 23, 2026, marked the first time Space Exploration Technologies Corp was included among the top 10 companies in the Morningstar US Total Market Index by total market capitalization. As a result, SpaceX joined the ranks of Nvidia Corp, Apple Inc, and Microsoft Corp as a mega-cap company, causing the mega/mid-cap threshold to increase to $99.6 billion, representing a 5.7% rise from the previous ranking in June. According to Alexander Poukchanski, Morningstar’s Director of Index Analytics, this increase would have been limited to 3.7% and approximately $97.7 billion without SpaceX’s inclusion.

The top 10 companies in the index now account for 35.1% of its total value, a level that has remained relatively consistent with the June ranking despite SpaceX’s significant entry. The weightings of the top companies are as follows: Nvidia at 7.1%, Apple at 6.3%, and Microsoft at 5.0%. Meanwhile, Alphabet saw its weighting decrease from 5.5% to 4.8% as Microsoft climbed the ranks.

Mega-Cap Threshold Rises

The number of mega-cap companies decreased to 165 at the September ranking, the lowest count in the past decade. This decline is a result of the increasing concentration of wealth at the top, which reduces the number of companies that qualify as mega-cap. The entry of a mega-cap IPO like SpaceX’s raises the threshold, potentially pushing smaller companies into lower capitalization segments, a structural aspect of market-cap-weighted indexes that advisors and portfolio managers must handle.

SpaceX’s impact on index turnover was somewhat less pronounced than expected. The company increased mega-cap reconstitution turnover by approximately 9.5 basis points and mid-cap turnover by approximately 104 basis points, below the projected 108-basis-point increase. Morningstar attributes this to its banding and packeting methodology, which implements index changes gradually by moving 50% of a company’s float-adjusted market capitalization at a time.

Micro-Cap Stocks Outpace Mega-Caps

Between the June 5 and September 4, 2026, ranking dates, micro-cap stocks outperformed both the total market and mega-cap securities, extending a trend that has persisted across four consecutive quarterly rankings. Additionally, value outperformed growth across all cap segments for the fourth consecutive quarter, a reversal from the growth-dominated decade that preceded it. The Morningstar US Micro Cap Index returned 6.72% between the June and September ranking dates, compared to 4.80% for the mega-cap index.

Year to date through the September ranking, micro-cap stocks returned 21.80%, significantly outpacing the 13.29% registered by the mega-cap index over the same period, according to Morningstar Direct data as of September 4, 2026. These findings highlight the importance of diversification for financial advisors building portfolios, as passive exposure to total-market and large-cap indexes alone may result in missed returns, particularly in the current environment.

The September ranking saw notable reclassifications across size and style segments. Seagate Technology Holdings and Western Digital Corp moved into the mega-cap category, reflecting gains tied to artificial intelligence demand. Moderna initiated a transition from small-cap to mid-cap after surging more than 200% between the June and September ranking dates. On the style side, over 100 securities changed their growth or value classification, with Intel shifting toward growth and McDonald’s, Uber Technologies, Adobe, and Intuit moving toward value.

Honeywell International’s index treatment highlighted the complexity introduced by corporate actions during reconstitution. Following the public listing of Quantinuum on June 4, 2026, and the spinoff of Honeywell Aerospace on June 29, both new entities were added to the Morningstar indexes to ensure the original investment in Honeywell International was fully captured in index returns.