Nvidia Joins the Dow Jones Industrial Average as Intel Exits

The leading artificial intelligence (AI) chip stock, Nvidia (NVDA), saw a nearly 3% increase in its stock price during Friday's after-hours trading. This positive movement comes as S&P Dow Jones Indices announced significant changes in the Dow Jones Industrial Average (^DJI), marking a new chapter for both Nvidia and Intel (INTC).

On Friday after the market closed, it was revealed that Nvidia would be replacing Intel in the Dow, which is the oldest stock index in the U.S. This change is set to take place before the market opens on Friday, November 8.

Nvidia’s Addition to the Dow

Intel, which has been a member of the Dow since 1999 during the peak of the dot-com era, will make way for Nvidia. This move highlights a shift in the index's representation of the semiconductor industry.

Why This Change Matters

The decision to replace Intel with Nvidia aims to provide "more representative exposure to the semiconductors industry," according to S&P Dow Jones Indices. Nvidia boasts an impressive market capitalization of $3.39 trillion, making it the second largest stock traded on a U.S. exchange, just behind Apple. In contrast, Intel's market cap stands at $99 billion, which is significantly smaller relative to Nvidia.

This change reflects the current technological landscape, as Nvidia is a major player in supplying chips crucial for AI capabilities, unlike Intel, which has struggled to maintain its dominance.

The History of the Dow Jones Industrial Average

The Dow Jones Industrial Average is a stock index comprising 30 large companies aiming to reflect the broader U.S. stock market and economy. Historically, it was dominated by heavy industrial and energy stocks but has increasingly included technology companies, recognizing their growing role in the economy. Currently, technology giants like Amazon, Apple, and Microsoft are also members of this prestigious index.

Nvidia’s Stock Split and Its Relevance

Nvidia's recent 10-for-1 stock split has positioned it more favorably for inclusion in the Dow. The index is weighted by stock prices, meaning higher-priced stocks have a larger impact on its performance. Before the stock split, Nvidia was trading at around $1,353 per share. This high price level would have made it unlikely for Nvidia to join the Dow. After the split, Nvidia's stock closed at $135.37, allowing for its addition.

The Benefits of Joining the Dow

Being included in the Dow Jones Industrial Average is significant for Nvidia and its shareholders. Membership means that mutual funds and exchange-traded funds (ETFs) that track the Dow will need to purchase Nvidia shares, resulting in increased demand and potentially driving up the stock price.

Nvidia investors are looking forward to more good news, with the company scheduled to report its quarterly earnings on November 20 for the period ending October 27.

Nvidia, Intel, Dow