SpaceX became a mega-cap constituent last quarter, pushing market concentration higher and prompting fresh scrutiny of index design
The largest initial public offering in history has officially made its mark on Wall Street's benchmarks. Morningstar completed its September 2026 quarterly reconstitution of the Morningstar Market Indexes on Sept. 23, and the fingerprints of Space Exploration Technologies Corp (SpaceX) are all over it.
SpaceX, which listed on June 12, 2026, and was added to the Morningstar US Total Market Index six trading days later under the firm's fast-track IPO process, ranked among the 10 largest companies in the US market by total market capitalization at the September ranking.
The company entered as a mega-cap constituent, a classification shared with the likes of Nvidia Corp, Apple Inc, and Microsoft Corp, and its arrival pushed the mega/mid-cap breakpoint up to $99.6 billion - a 5.7% increase from the June 2026 ranking.
Without SpaceX, that breakpoint would have been approximately $97.7 billion, a rise of only 3.7%, according to Morningstar's September 2026 reconstitution report authored by Alexander Poukchanski, Director of Index Analytics.
How concentration is shifting
The top 10 companies in the Morningstar US Total Market Index now account for approximately 35.1% of the index, essentially unchanged from June 2026 but still at historically elevated levels. Nvidia leads with a 7.1% weighting, followed by Apple at 6.3% and Microsoft at 5.0%. Alphabet fell from 5.5% to 4.8% as Microsoft climbed in the other direction.
The number of mega-cap companies fell to 165 at the September ranking, marking the lowest level in the past decade, according to the Morningstar report. It’s a consequence of rising concentration at the top compressing which companies qualify for the segment. When a mega-cap IPO of SpaceX's scale enters the market, it raises the breakpoint, which can push smaller companies into lower capitalization segments. That cascading effect is a structural reality of market-cap-weighted indexes that advisors and portfolio managers are increasingly navigating, as WP has reported on the growing pressure on advisors to diversify beyond concentrated large-cap ETFs.
SpaceX's effect on the indexes was somewhat more muted than initially expected. The company increased mega-cap reconstitution turnover by approximately 9.5 basis points - slightly below Morningstar's earlier 10-basis-point estimate - and mid-cap turnover by approximately 104 basis points, below the 108-basis-point estimate.
The firm attributes this to its use of banding and packeting methodology, which phases in index changes by moving 50% of a company's float-adjusted market capitalization at a time, rather than immediately reflecting a full reclassification.
Value holds the edge, small caps shine
Beyond the SpaceX effect, the September period offered a broader lesson in the value of diversification across market-cap segments - a theme resonating with advisors who have spent the past several years wrestling with concentration risk in their clients' portfolios.
Between the June 5 and Sept. 4, 2026, ranking dates, micro-cap stocks outperformed both the total market and mega-cap securities, extending a trend that has now persisted across four consecutive quarterly rankings.
Value also outperformed growth across all cap segments for the fourth consecutive quarter, a sustained reversal from the growth-dominated decade that preceded it. The cumulative advantage of value was largely driven by the period between the December 2025 and March 2026 rankings, the report notes, and the margin has moderated somewhat since.
The Morningstar US Micro Cap Index returned 6.72% between the June and September ranking dates, compared with 4.80% for the mega-cap index. Year to date through the September ranking, micro-cap stocks returned 21.80% - meaningfully ahead of the 13.29% registered by the mega-cap index over the same period. These figures are drawn directly from Morningstar Direct data as of Sept. 4, 2026.
For financial advisors building diversified portfolios, the data reinforces what the broader conversation around index concentration risk has been pointing toward: passive exposure to total-market and large-cap indexes alone may be leaving returns on the table, particularly in the current environment.
What's moving within the indexes
The September ranking brought notable reclassifications across size and style segments. In the large-cap space, Seagate Technology Holdings and Western Digital Corp moved fully into mega-cap, reflecting durable gains tied to artificial intelligence demand.
Moderna, meanwhile, initiated a packet from small-cap to mid-cap after surging more than 200% between the June and September ranking dates - though the company must hold its relative position through the next ranking before completing that transition.
On the style side, more than 100 securities changed their growth or value classification during the September ranking. Intel packeted toward growth across multiple indexes following improvements in growth expectations, while McDonald's, Uber Technologies, Adobe, and Intuit moved toward value. Dell Technologies packeted toward growth in the large- and core-cap indexes (but not mega-cap) reflecting that its growth profile was less distinctive relative to mega-cap peers than within the broader large-cap universe.
Honeywell International's index treatment illustrated the complexity that corporate actions introduce at reconstitution. Following Quantinuum's public listing on June 4, 2026 - a spinout of Honeywell Quantum Solutions and Cambridge Quantum - and the June 29 spinoff of Honeywell Aerospace, both new entities were added to the Morningstar indexes to ensure the original investment in Honeywell International was fully captured in index returns.
What comes next
Looking ahead, Morningstar's report flags additional mega-cap IPOs on the horizon - specifically Anthropic and OpenAI - as potential drivers of continued upward pressure on top-level concentration. If those listings proceed, the mega-cap segment will likely require further adjustment to keep the Morningstar Market Indexes aligned with the evolving market structure.
Advisors building portfolios tied to broad market benchmarks would do well to understand how index methodology handles these inflection points. As Morningstar's team notes, the challenge of managing transaction costs against meaningful market evolution mirrors the decisions facing any portfolio manager and the methodology choices made by index providers now carry real consequences for fund investors.
