Why did the BrainChip share price spike 7% this morning?

A man in his 30s holds his computer underneath and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.

A man in his 30s holds his computer underneath and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.

It’s been a pretty bleak day for most ASX shares so far this Monday. At the time of writing, the S&P/ASX 200 Index (ASX: XJO) has lost 0.71% and is now back in the low 6,400s. But no one seems to have told the BrainChip Holdings Ltd (ASX: BRN) share price.

Brainchip shares are having a fairly wild day today. The company is presently flat at 90.5 cents a share, right on where it closed at last week. But at market open this morning, Brainship shares spiked dramatically. This artificial intelligence (AI) company jumped to 96 cents a share soon after trading commenced today.

At the time, that was a rise of 6.67%.

So what’s going on with this ASX tech share today?

Why is the Brainchip share price going haywire today?

Well, we can’t be too certain. Brainchip hasn’t come out with any ASX announcements itself but today is a rather big day for Brainchip. It’s the day that the company has officially joined the S&P/ASX 200 Index (ASX: XJO).

The ASX 200 is the flagship index of ASX shares. It tracks the 200 or so largest companies on our share market, ordered and weighted by market capitalisation. Since the values of ASX shares change every day, the index’s provider rebalances the index every three months to ensure that the ASX 200 always reflects the largest companies at the time.

As it happens, Brainchip has made the cut for the first time, helped no doubt by the company’s meteoric near-70% rise in value over the past 12 months. The results of the latest quarterly ASX 200 rebalance were announced back on 3 June and take effect from today.

This saw Brainchip included in the ASX 200, alongside other shares like Core Lithium Ltd (ASX: CXO) and New Hope Corporation Limited (ASX: NHC). They take the place of other ASX shares like Appen Ltd (ASX: APX) and Codan Limited (ASX: CDA), which have now been kicked out of the ASX 200.

ASX 200 inclusion (and exclusion) can have a meaningful impact on a company’s share price. It moves a share towards the centre of the ASX investing universe, and also potentially enables additional investment from fund managers and index funds.

So it’s possible that the gyrations we’ve seen in the Brainchip share price today could be the result of this rebalancing taking effect.

The post Why did the BrainChip share price spike 7% this morning? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Appen Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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