Flex Ltd., the electronics manufacturing services provider, is poised to enter the S&P 500 index as part of the quarterly rebalancing scheduled for June 22. The index inclusion, announced by S&P Dow Jones Indices, places Flex alongside Marvell Technology as new additions, replacing Pool Corp. and Campbell Soup. While index membership often triggers buying from passive funds, Flex shares declined 4.8% on Friday to $151.92, caught in a broader technology selloff that saw the Nasdaq Composite fall 4.18% and the S&P 500 technology sector drop 5.8%.
The stock traded between $149.39 and $160.79 during the session, reflecting the volatile market conditions. The selloff extended across the electronics manufacturing and data-center supply chain, with Jabil down 5.5%, Sanmina dropping 10%, and Celestica losing 12.6%. Analysts attributed the downturn to profit-taking after a nine-week rally in tech and semiconductor stocks. Ryan Detrick, chief market strategist at Carson Group, noted that the market's "dam just broke" after the record run, while Wells Fargo's Ohsung Kwon said the move was "more driven by positioning than fundamentals."
AI Data-Center Power Unit Takes Center Stage
Flex's upcoming S&P 500 inclusion comes amid a rapid re-rating of the company, which was once viewed primarily as a contract manufacturer but now attracts investor interest for its Cloud and Power Infrastructure (CPI) unit. CPI, which provides power and cooling solutions for AI data centers, has become a key growth driver as hyperscale data-center operators ramp up capacity to meet surging AI demand.
In its fiscal 2026 annual filing, Flex reported that CPI sales surged 38% to $6.61 billion, representing 24% of total revenue. Overall company revenue rose 8% to $27.91 billion. The unit's margin, however, contracted by 100 basis points due to ramp-up costs and a shift in product mix toward cloud and cooling products. A basis point is one-hundredth of a percentage point.
Spin-Off Plans and Leadership Changes
Flex has announced plans to spin off its power-and-cloud unit as a separate publicly traded company by early 2027, subject to approvals and market conditions. The spin-off is intended to be tax-free for shareholders. Reuters reported in May that CEO Revathi Advaithi is expected to lead the new power-and-cloud company, while Michael Hartung would take the helm of the remaining Flex operations.
Flex executives continue to emphasize the AI narrative. Chris Butler, head of embedded and critical power at Flex, stated this week that "the rapid growth of AI is driving new demands on data center power infrastructure," coinciding with the launch of new power products for next-generation AI server racks.
Financial Performance and Analyst Views
CEO Revathi Advaithi highlighted "disciplined execution and a clear strategy" in the fiscal 2026 year-end report, pointing to acquisitions and capital spending focused on long-term growth. Flex posted adjusted earnings of $3.30 per share and an adjusted operating margin of 6.3% for the year. Barclays analyst Tim Long raised his price target on Flex to $203 from $174 on June 4, maintaining a Buy rating.
Despite the positive developments, risks remain. The CPI margin decline, potential slowdown in AI spending, unfavorable spin-off terms, or further tech sector pullbacks could overshadow the S&P 500 inclusion. The index addition is set for June 22, and investors will watch whether forced buying from index funds can offset the market's waning patience with high-flying AI-linked stocks.
