Four American Giants Are Leaving the S&P 100 Technology Is Taking Their Place

By Keith Turner

Nike makes shoes worn around the world. Colgate-Palmolive makes products that sit inside millions of homes. Simon Property Group owns some of America’s most recognizable shopping destinations. Honeywell Aerospace builds technology embedded throughout modern aviation. These are not companies searching for relevance. They are institutions of American business, representing four very different ways corporations have built enormous value through products, property, industry and consumer relationships.

On September 21, all four will leave the S&P 100. Taking their places will be Dell Technologies, Palo Alto Networks, Arista Networks and Sandisk. The companies departing come from four different sectors—consumer discretionary, industrials, real estate and consumer staples. Every company entering comes from information technology. (press.spglobal.com)

It is an unusually clean picture of a much larger economic shift, but it is important not to assign an intention to the changes that S&P itself has not. S&P did not announce that technology should replace sneakers, toothpaste, malls and aerospace. Its stated explanation is considerably more mechanical: the changes are intended to make its indexes more representative of their respective market-capitalization ranges. The S&P 100 is a committee-selected subset of the S&P 500 that generally draws from its largest companies with listed options while also considering sector balance. (spglobal.com)

That explanation makes the moment more revealing, not less. S&P isn’t creating the shift. It is recording one that has already happened. The four companies leaving did not suddenly become small. The companies around them became bigger.

For much of modern American corporate history, enormous value was created by controlling pieces of everyday physical life. Companies built global businesses around what people wore, what they kept in their homes, where they shopped and how people and goods moved through the world. Nike became one of the greatest examples of that model. It did not simply manufacture athletic shoes. It built desire around them, connecting professional sports, music, fashion, advertising and identity until a swoosh could communicate something before a consumer ever saw the product.

Colgate-Palmolive built its position differently, around the extraordinary value of habitual consumption. Simon accumulated another kind of power by owning the physical places where commerce happened. Honeywell Aerospace built its position deeper inside the industrial economy, providing systems and technologies essential to aviation. These companies have little in common operationally, but each represents a familiar architecture of corporate power: own the product, own the relationship, own the place or own an essential piece of the physical system.

The companies entering the S&P 100 represent another architecture. Dell provides computing systems. Palo Alto Networks protects digital environments. Arista Networks builds networking technology connecting increasingly complex computing infrastructure. Sandisk provides storage technology for an economy producing extraordinary quantities of data. Computing, cybersecurity, networking and storage are different businesses, but they increasingly occupy the same underlying layer of modern economic activity.

That distinction matters because technology is no longer simply an industry operating alongside the rest of the economy. Increasingly, it is a layer through which the rest of the economy operates. A retailer needs computing infrastructure. A bank needs cybersecurity. A manufacturer needs networks. A streaming company needs storage. A global consumer brand runs supply chains through software and data. An airline depends on layers of digital systems long before an aircraft leaves the ground. Artificial intelligence is accelerating demand across parts of that architecture, but it is entering a transformation that was already well underway.

Capital markets have been assigning extraordinary value to the companies building those systems, and the composition of the S&P 100 increasingly reflects it. Information technology already represented 43.8 percent of the index’s weight at the end of August, according to S&P’s own data. The median market capitalization of an S&P 100 constituent was approximately $211 billion. (spglobal.com) In that environment, being a huge corporation and being huge enough for this particular room are no longer necessarily the same thing.

Nike makes that contradiction particularly easy to understand. The swoosh remains one of the world’s most recognizable commercial symbols. Nike remains embedded in professional sports, sneaker culture, fashion and retail. Its cultural footprint is enormous, and none of that disappears because an index committee changes a list. But financial markets measure a different kind of power. A company can remain culturally dominant while becoming relatively smaller against businesses whose valuations have risen around the systems investors believe will power the next phase of economic growth.

That is why treating this rebalance simply as four companies being demoted misses the larger story. Nike, Colgate-Palmolive, Simon Property Group and Honeywell Aerospace will all remain in the broader S&P 500. (press.spglobal.com) They have not ceased to be major corporations, and the physical economy they represent isn’t disappearing. People will continue buying shoes and toothpaste, visiting shopping centers and flying on airplanes. What is changing is the amount of value being created and captured by another layer underneath many of those activities.

The store processing a transaction depends on computing and payments systems. The consumer company coordinating production across continents depends on data. The shopping center operates through networks, software and digital commerce. Airlines and manufacturers increasingly function through vast interconnected technological systems. The companies that became enormous by owning products, places and physical distribution now operate in an economy where some of its most valuable businesses own pieces of the digital architecture underneath those products, places and transactions.

There are limits to what a single index rebalance can tell us. Four technology companies entering simultaneously does not mean every technology company will become more valuable than every consumer or industrial company. It does not mean the S&P 100 is destined to become an all-technology index. And because S&P considers factors beyond market capitalization, the index should not be treated as a literal ranking of America’s 100 largest corporations. But none of those qualifications erase what makes this particular change worth noticing.

Look at the businesses leaving: sportswear, household products, real estate and aerospace. Then look at the businesses entering: computing, cybersecurity, networking and storage. They are not literal one-for-one replacements, and S&P has not presented them that way. Collectively, however, they provide an unusually legible snapshot of where extraordinary corporate value has accumulated.

There will be nothing dramatic to see when the change takes effect on September 21. Nike stores will open as usual. Colgate products will remain on shelves. Simon malls will welcome shoppers. Aircraft will continue flying with Honeywell technology aboard them. Four names will simply come off one index and four others will go on.

That quietness is precisely what makes the moment interesting. Indexes tend to make gradual transformations visible only after much of the transformation has already occurred. Computing became essential. Networks became essential. Cybersecurity became essential. Data became an asset requiring increasingly sophisticated systems to store, move and protect it. Artificial intelligence is now placing even greater demands on that architecture. The S&P 100 did not cause any of it. The September rebalance simply gives us a remarkably clear place to see the result.

Four enormous American companies are leaving one of the country’s most concentrated blue-chip indexes, and four technology companies are moving into their places. The story is not that America’s giants suddenly became small.

It is that the American economy has been building a new class of giants around them.