What happened
Shares of Lucid Group (LCID -1.04%) rose 4% on Monday after news broke that the electric-vehicle (EV) maker would be added to a popular stock index.
So what
Lucid will join the Nasdaq-100 index on Dec. 20. The market-cap-weighted index contains 100 of the largest non-financial companies listed on the Nasdaq Stock Market. Major holdings include Apple, Tesla, and a host of other major tech companies, making the Nasdaq-100 a closely followed benchmark for growth investors.
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The news will likely boost trading volumes in Lucid's stock. Managers of funds that track the Nasdaq-100 will need to buy the EV company's shares following its inclusion in the index.
This forced buying on the part of fund managers could drive Lucid's stock price up for a short period of time. Traders are aware of this dynamic, and many of them likely bought ahead of these fund's purchases, hoping to front-run their trades.
Now what
Investors, however, will want to focus more on Lucid's long-term prospects. Fortunately, the EV leader has massive expansion potential. Electric vehicles are rapidly gaining favor among consumers across the world, and analysts are ramping their growth estimates for the industry.
For one, Wedbush analyst Daniel Ives projects that EVs will comprise up to 30% of global auto sales by 2030, fueling a staggering $5 trillion market opportunity in the coming decade.
If Lucid can capture even a small share of this enormous market, it could become a far more valuable business than it is today.
