The annual recalibration of the Russell US indexes will see Alphabet Inc. and Advanced Micro Devices Inc. removed from the Russell 1000 Value Index, a move that will trigger billions in forced selling by passive funds. The reclassification, part of FTSE Russell’s comprehensive annual reconstitution that reflects shifting market dynamics, designates the two tech giants as entirely growth-oriented stocks.
The reclassification is a mechanical process based on FTSE Russell's methodology, which assesses companies on metrics like price-to-book ratios and growth forecasts. "The reconstitution is a significant, market-moving event that forces portfolio managers to re-align their holdings," explains the guidance from FTSE Russell, highlighting the non-discretionary nature of the trading activity that follows.
This reclassification will compel passive funds tracking the Russell 1000 Value Index to liquidate their positions in both companies, while funds tracking the Russell 1000 Growth Index will be forced buyers. The shift also saw Walmart Inc. replace Eli Lilly & Co. among the top ten companies in the value index. In the broader Russell 3000 Index, the reconstitution added a wave of crypto-related companies, including Ethereum treasury holder BitMine Immersion Technologies (BMNR) and SharpLink Gaming (SBET), according to the preliminary additions list.
The primary impact for Alphabet and AMD is the potential for short-term price volatility as billions of dollars in shares are traded over a short period in late June. This mandatory selling by value funds, estimated to be around $8.5 billion for Google and $2.5 billion for AMD, could create downward price pressure, even as growth funds absorb the shares. The event underscores the powerful, if sometimes disruptive, role that index providers play in equity market structure.
Crypto Firms Follow MSTR Playbook
The inclusion of companies like BitMine and SharpLink in the Russell 3000 signals a growing acceptance of crypto-centric corporate strategies within mainstream financial benchmarks. This follows the path forged by Michael Saylor’s Strategy (MSTR), which was promoted to the large-cap Russell 1000 Index in June 2024 after its aggressive Bitcoin accumulation strategy led to a significant share price increase.
Despite mixed financial results, the index inclusion is a milestone for these firms. BitMine, which holds over 5 million ETH, reported a quarterly revenue of $11.04 million but also an EPS loss of $0.08. Similarly, SharpLink Gaming missed revenue and earnings estimates in its latest report. However, their addition to the Russell 3000, a benchmark for institutional investors, provides a new layer of validation and potential access to a wider pool of capital, demonstrating the increasing financialization of digital assets.
This article is for informational purposes only and does not constitute investment advice.
