S&P 500 investors face new risks as Spacex-Tesla merger, Anthropic IPO plans emerge

Financial experts, including Warren Buffett, often advise individual investors to spread their money across the broader US stock market instead of investing in just a few companies. An S&P 500 index fund helps investors do this by tracking some of the largest companies listed on US stock exchanges.S&P 500 investors face new risks amid a potential SpaceX-Tesla merger and Anthropic IPO. (REUTERS/Dado Ruvic/Illustration/File Photo) (REUTERS)However, investors who own S&P 500 index funds may face new questions as two major developments emerge: SpaceX CEO Elon Musk is considering a possible merger with Tesla, and artificial intelligence (AI) company Anthropic has taken steps towards going public, CNBC reported.Musk said he would consider combining SpaceX with Tesla during SpaceX's third-quarter earnings call last week. If the deal goes ahead, it could become the largest merger in history.Anthropic filed an S-1 registration statement with the US Securities and Exchange Commission (SEC) on Monday, October 26. The filing signals the AI company's intention to go public.Both developments could involve companies worth trillions of dollars. SpaceX has an estimated market value of $2 trillion, while Tesla is valued at around $1.55 trillion. A merger between the two would create a company worth about $3.55 trillion, based on their current market values, according to CNBC.A combined SpaceX-Tesla company could rank as the fifth-largest company in the market by value. Meanwhile, Anthropic could seek a valuation of $1.5 trillion to $2 trillion in its IPO, potentially placing it among the world's eighth- to twelfth-largest companies at current market prices.However, these developments do not mean that SpaceX, Tesla's potential merged company or Anthropic will automatically become major holdings in S&P 500 index funds. Their inclusion depends on the index's rules, the details of any merger and other eligibility requirements.Also read: Gold prices hold near $4,000 as traders await Fed rate decision amid inflation concernsHow stocks get added to the S&P 500The S&P 500 tracks 500 leading US companies and generally weights them according to their market value. However, companies cannot automatically enter the index just because they become large or have a high stock market valuation.The S&P 500 is widely followed by investors. S&P Dow Jones Indices estimated that about $16 trillion was invested in products designed to track the index as of the end of 2025, highlighting how many investors could be affected by changes to its holdings.SpaceX is not currently part of the S&P 500. The index generally requires newly listed companies to wait 12 months before becoming eligible for inclusion, meaning SpaceX would have to wait until June 2027 to be considered, according to CNBC.Anthropic could also face a similar waiting period after its IPO before the S&P 500's index committee considers adding its stock. Its filing to go public does not guarantee that it will become part of the index.The potential SpaceX-Tesla merger could face a different set of rules. Its treatment in the index would depend on how the merger is structured and how many shares of the combined company are available for public investors to buy, according to experts cited by CNBC.S&P Dow Jones Indices told CNBC Make It that it does not comment on hypothetical situations or whether a particular company would qualify for the index. Its rules state that mergers and acquisitions are reviewed individually.Under the index's methodology, if an existing S&P 500 company buys a company that is not part of the index, the acquired company generally remains in the index through the transaction. However, the index provider may remove it if the deal affects its eligibility.A company outside the S&P 500 that acquires a company already included in the index could also be added to the index, provided it meets the other eligibility requirements. The final decision rests with the index committee, according to the methodology cited by CNBC.Also read: US banks face bond losses as Treasury yields surge, raising risks to share buybacks and capital strengthWhat the developments could mean for investorsIt is still unclear whether Anthropic or a combined SpaceX-Tesla company will eventually join the S&P 500. However, if either company enters the index, investors who hold funds tracking it could gain exposure to these businesses without buying their shares directly.One possible effect is that investors could have more of their money tied to companies led by Musk. Seth Goldstein, a senior equity analyst at investment research firm Morningstar, said this would increase investors' exposure to Musk's plans for future technology.Goldstein explained that investors who buy Tesla or SpaceX directly often do so because they believe Musk can turn ambitious ideas into real products. These include self-driving cars and useful humanoid robots, he told CNBC.However, investors who own an S&P 500 index fund may not have chosen to invest specifically in Musk's companies. If a combined SpaceX-Tesla business becomes a major index holding, they could end up with greater exposure to Musk's business plans through their existing investments.S&P 500 concentration risk could increaseAnother major concern is concentration risk. This happens when a large share of an investment portfolio depends on a small number of companies, making the portfolio more exposed to their performance.Nearly 40% of the assets in a typical S&P 500 fund are currently invested in the index's 10 largest holdings. Many of these companies are directly or indirectly linked to the growth of artificial intelligence, CNBC reported.However, the index's top 10 companies have not always made up such a large share of its value. Research from T. Rowe Price found that the top 10 constituents accounted for an average of 23% of the S&P 500 between December 1965 and March 2026.Adding a combined SpaceX-Tesla company or Anthropic to the index could increase its exposure to technology and AI businesses. It could also increase the index's dependence on companies whose stock prices have already risen sharply, according to Brent Leadbetter, head of RAFI distribution at investment research firm TMX VettaFi.Why expensive stocks can be riskyLeadbetter warned that investors should be careful about concentration in market-capitalisation-weighted indexes. Companies enter the top ranks of these indexes after their shares rise faster than those of other businesses, meaning their stocks may already be expensive by the time they become major holdings.Leadbetter also cautioned that buying expensive stocks after they have delivered strong returns can leave investors with weaker gains in the future. In other words, companies that have performed exceptionally well in the past may not continue to deliver the same level of returns, he told CNBC.What S&P 500 investors should watchThe key concern for S&P 500 investors is therefore not simply whether SpaceX, Tesla's potential combined business or Anthropic becomes part of the index. It is also whether their inclusion increases the portfolio's dependence on a small group of large technology and AI companies, potentially exposing investors to greater risks if those stocks fall, according to the concerns raised by experts cited by CNBC.