Nvidia Replaces Intel in the Dow Jones Industrial Average

The leading artificial intelligence (AI) chip company, Nvidia (NVDA), saw its stock rise nearly 3% in after-hours trading on Friday. This optimistic turn of events comes as S&P Dow Jones Indices announced that Nvidia will replace fellow chipmaker Intel (INTC) in the Dow Jones Industrial Average (^DJI) index.

Nvidia's stock gained about 2.9%, while Intel's stock followed a different path, dropping by 1.9% during the same trading session.

Joining the Dow Jones Industrial Average

Nvidia is set to officially join the Dow Jones Industrial Average before the market opens on Friday, November 8. Intel has been a member of the Dow since 1999, during its peak in the dot-com era.

Reasons for the Replacement

Nvidia is taking Intel's place in the Dow to provide a more accurate reflection of the current semiconductor industry. As stated by S&P Dow Jones Indices in their press release, this change aims to ensure the index better represents this sector. Nvidia leads the market with a market capitalization of approximately $3.39 trillion, making it the second largest U.S. stock, just behind Apple. In contrast, Intel's market cap stands at around $99 billion, merely 1/34th of Nvidia's size. Additionally, Nvidia's prominence in supplying chips for AI technology makes it a more fitting representative of today's tech landscape.

The Dow Jones Industrial Average is comprised of 30 large stocks meant to represent the broader U.S. stock market and economy. Historically, it included mainly industrial and energy companies but has shifted focus to include more technology stocks, reflecting their growing influence in the economy. Well-known tech giants such as Amazon, Apple, and Microsoft are currently part of the Dow.

Nvidia's Stock Split and Its Impact

The Dow index is price-weighted, which means that stocks that trade at higher prices have a larger impact on the index's performance. This characteristic typically limits high-priced stocks from being included in the Dow. Nvidia's recent 10-for-1 stock split, conducted in June, made its inclusion in the index possible. Before the split, Nvidia's stock would have traded around $1,353 per share; however, after the split, it closed at $135.37 on Friday.

The Benefits of Joining the Dow

Becoming a member of the Dow Jones Industrial Average carries significant benefits for Nvidia and its investors. Membership means that funds and ETFs that track the Dow will need to purchase Nvidia shares, increasing demand and likely pushing the stock price higher.

Nvidia investors are looking forward to further positive developments, especially with the upcoming quarterly earnings report scheduled for November 20, covering results up to October 27.

Nvidia, Intel, Dow