- Computacenter, Aberdeen, and Investec are to enter the FTSE 100 at the end of the month
- Berkeley, Rightmove and Mondi will drop down to the FTSE 250
- Computacenter is currently benefiting from the AI-related data centre building boom
- Its promotion could add some AI lustre to an index that is often criticised for its lack of technology exposure
- A slew of AI-related index entrants could be more of a warning sign
“Six promotions to, and six relegations from, the FTSE 100 at the half-way stage of a year is smack in line with the long-term average of annual changes to the index’s constituents over its 42-year lifespan, but the promotion of Computacenter continues to draw positive comment,” says AJ Bell investment director Russ Mould.
“The question now is whether Computacenter’s elevation to the FTSE 100 is going to lead to wider changes in the benchmark’s make-up that galvanise its fortunes, or is an early warning sign that investors are forgetting some valuable, and expensive, lessons from past speculative episodes.
“Each quarter, FTSE Russell assesses the constituents of the UK’s leading stock market indices and makes changes based on their stock market capitalisation, as well as the percentage of the shares that are freely available to buy or sell, and a few other criteria besides.
“This time around, financial services specialists Aberdeen and Investec, as well as technology hardware reseller Computacenter will go into the FTSE 100 index towards the end of June. To make way, online estate agent Rightmove, packaging play Mondi and high-end housebuilder Berkeley will drop down into the FTSE 250.
“There is nothing unusual about such ebb and flow in the FTSE 100’s make-up. The six promotions to, and six demotions from, the index in 2026 to date compares to an average of 12 a year across the FTSE 100’s lifetime, which dates back to 1984. Just 26 of the benchmark’s original one hundred members are still in the FTSE 100, and only half of those have the same name as they did 42 years ago.
Source: FTSE Russell. *2026 to date.
“The latest changes to the make-up for the leading index’s one hundred members is drawing largely favourable comment, thanks to Computacenter’s promotion.
“It is seen as the sort of technology-related company that the FTSE 100 sorely lacks, at least in comparison to the US stock market. Here, barely 1% of the FTSE 100’s £2.5 trillion stock market cap comes from technology companies. In the USA, technology stocks represent 39% of that benchmark’s $65 trillion market valuation.
Source: FTSE Russell, S&P.
“Computacenter’s business of providing vital equipment to big technology projects, such as cable and cooling equipment, means it is well positioned to capitalise upon the build-out of the data centres that power the large language models, or LLMs, that are the key to artificial intelligence platforms, and their agents and chatbots.
“Computacenter could therefore be poised to keep benefiting from the capital investment splurge at the so-called AI hyperscalers, who are locked in an arms race to develop leading-edge LLMs and grab market share in a build-and-they-will-come strategy, whereby they will win eyeballs and customers now and make returns on investment later.
Source: Company accounts, Marketscreener, analysts’ consensus estimates for Alphabet, Amazon, Meta Platforms, Microsoft, and Oracle.
“Whether the hyperscalers succeed in making an adequate return on this capital remains a matter of heated debate, but there can be no denying that Computacenter is selling the kit that is needed, as can be seen from its sales and profit momentum.
Source: Company accounts, Marketscreener, analysts’ consensus estimates.
“This contrasts with housebuilder Berkeley Group, with its recent run of profit warnings and a profile which suggests earnings peaked some three years ago, at least for this cycle.
Source: Company accounts, Marketscreener, analysts’ consensus estimates.
“One tech company entering the FTSE 100 hardly makes for a bubble. But a slew of new entrants all claiming to be an AI beneficiary might be a different matter, at least if history is any guide, even if we must accept that the past is no guarantee for the future.
“During the technology, media, and telecoms bubble, five TMT stocks sluiced into the FTSE 100 in 1998, followed by nine more in 1999 and then another eleven in 2000.
“However, as the bubble popped, nine swiftly reversed out in 2000, followed by nine relegations in 2001 and a further four departures in 2002.
“TMT stocks have never really recovered, at least here in the UK. The best year for new TMT promotions since the collapse of the bubble was 2021, when three made the leap, in the form of Renishaw, Darktrace and Airtel Africa – and of those three only the last-named is still there.
Source: FTSE Russell data.
“A similar pattern can be seen in the resources sectors, albeit not with the same extremes as TMT.
“As oil peaked at $147 a barrel in 2007, both hydrocarbon producers and oil equipment and services companies were the flavour of the day, while surges in the price of gold and silver and copper through to 2011 helped to buoy interest in the miners, too.
“Resources companies gushed into the FTSE 100 in the middle of the first decade of this millennium, but they did not stay there long, as oil and then gold and silver peaked and the flood of drillers and diggers has since slowed to a trickle. Contrarians may argue this makes them of more interest now, especially given limited capital investment in new mines and wells in the 2010s, and how Covid, Russia’s attack on Ukraine and now the war in the Middle East may be placing fresh emphasis upon the importance of resource availability from the perspective of both economic growth but also national security.
Source: FTSE Russell data.
“A final example of this zero-to-hero-to-zero trend is the housebuilding sector.
“The launch of Help to Buy by then Chancellor of the Exchequer George Osborne in 2013 gave the builders a boost, including Berkeley which entered the FTSE 100 in 2015, dropped out in 2016, and bounced back in 2017, only to lose its place once more in mid-2026.
Source: FTSE Russell data.
“The good news is we are not currently seeing anything like the frenzied churn in FTSE 100 index membership that characterised the TMT boom of 1998 to 2000, though a repeat of that sort of volatility may be a warning sign of a bust of some kind coming around the corner.”
