TLDR
- Robinhood Markets (HOOD) stock fell 3.65% after being snubbed for S&P 500 inclusion, despite having a larger market cap than 374 current index members
- The company was passed over in favor of Datadog (DDOG), which has roughly half of Robinhood’s $86.5 billion market valuation
- OpenAI publicly distanced itself from Robinhood’s new tokenization features, stating they didn’t partner with the company and don’t endorse the tokens
- Parnassus Mid Cap Growth Fund highlighted HOOD as an attractive investment after the stock retreated from recent highs
- Despite the S&P 500 snub, analysts believe Robinhood’s inclusion is inevitable given its size and market position
Robinhood Markets took a hit Thursday, dropping 3.65% after being passed over for inclusion in the S&P 500 index. The disappointment came despite the trading platform’s hefty $86.5 billion market valuation.
The company was overlooked in favor of Datadog, a cloud-monitoring software firm worth roughly half of Robinhood’s market cap. Datadog’s stock jumped nearly 15% on the inclusion news, highlighting the stark contrast in market reactions.
The selection process raised eyebrows given Robinhood’s size advantage. The company is now worth more than 374 current S&P 500 members, including household names like Cigna, CVS, Dell Technologies, and Airbnb.
S&P Dow Jones Indices chose Datadog to replace Juniper Networks, which was acquired by Hewlett Packard Enterprise. Since HPE was already in the index, this created an opening for a new company.
The stock’s decline wasn’t solely due to the S&P 500 snub. OpenAI added to the pressure with a pointed statement on X Wednesday evening.
OpenAI Controversy Adds Pressure
The AI company distanced itself from Robinhood’s recently announced tokenization features. OpenAI clarified they “did not partner with Robinhood, were not involved in this, and do not endorse it.”
The statement specifically addressed Robinhood’s new offering of OpenAI tokens to customers. OpenAI emphasized that these tokens “are not OpenAI equity.”
Robinhood CEO Vlad Tenev responded on X, acknowledging the tokens aren’t technically equity. However, he defended the product, stating the tokens “effectively give retail investors exposure to these private assets.”
The back-and-forth highlighted tensions around the company’s expansion into tokenized assets. This new feature was part of broader crypto and tokenization announcements that had initially boosted the stock.
Despite Thursday’s setback, Robinhood shares remain up more than 10% for the week. The stock had risen 6% Wednesday before the S&P 500 news broke.
Strong Performance Despite Setback
The year has been exceptionally strong for Robinhood investors. Shares have more than doubled in 2025, reaching record highs on renewed retail trading enthusiasm.
The rally has been fueled by increased interest in stocks, Bitcoin, and other risk assets among retail traders. Speculation about potential S&P 500 inclusion had also supported the recent run-up.
Parnassus Mid Cap Growth Fund recently highlighted Robinhood as an attractive investment opportunity. The fund noted they were able to invest after the stock retreated from recent highs.
The fund praised Robinhood as “a fast-growing trading platform that allows ordinary investors to access trading at any time during the week.” They also noted the company’s expansion into new product offerings and international markets.
Historical precedent suggests the S&P 500 snub may be temporary. Tesla faced a similar situation in September 2020 when it was passed over for Etsy, only to be added to the index three months later.
More recently, Coinbase Global was passed over in March before being added to the S&P 500 in May. The crypto exchange’s stock soared almost 25% on its inclusion news.
Given Robinhood’s size and market position, analysts believe S&P 500 inclusion remains likely. The company’s $86.5 billion valuation makes it increasingly difficult to ignore for index managers.
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