Major stock index adds electric car maker Tesla

The market value of Tesla has soared to around $600 billion, making it the largest company ever to be added to the S&P 500. It’s inclusion on December 21 is expected to trigger a torrent of trading and a spike in volatility. (Dec. 17)

Video Transcript

DAN IVES: The S&P 500 index is-- you know, you're really talking about one of the most followed and held indexes around the world from a stock-market perspective. Tesla getting into this, it's going to be about 1% of the overall market cap, and it's a huge feather in the cap for Tesla to be part of this exclusive club.

For Tesla, it's further validation of not just their strategy in terms of electric vehicles but profitability. It just shows how far they've come, and that's-- you know, a big part of that is Elon Musk and the vision at Tesla as they've really, you know, transformed and built out the EV industry, but they've done it profitably. And them getting to S&P 500, it gives them further credibility with institutional investors as well as individual investors going forward.

It does come with a heavier weight in terms of profitability that they need to maintain, need to make sure there's no more red ink, and it's 1% of the index. So Tesla is a volatile stock. Any sort of major downdraft would have a disproportional impact on the S&P given it's 1% of the market cap effective Monday morning.