Nvidia Stock Joins the Dow Jones Industrial Average, While Intel Exits

Nvidia, a leader in artificial intelligence (AI) chip manufacturing, saw its stock rise nearly 3% during Friday's after-hours trading. This positive movement followed an announcement by S&P Dow Jones Indices, which revealed that Nvidia will be replacing Intel in the Dow Jones Industrial Average (DJIA), the oldest stock index in the United States.

As the news broke, Nvidia's stock increased by 2.9%, while Intel's stock declined by 1.9% in the same trading session.

When Will Nvidia Join the Dow Jones Industrial Average?

Nvidia's addition to the Dow will take effect before the market opens on Friday, November 8. Intel has been a part of this prestigious index since 1999, specifically added during the peak of the dot-com era.

Why Is Nvidia Replacing Intel in the Dow Index?

The rationale behind Nvidia's replacement of Intel in the DJIA is to provide "a more representative exposure to the semiconductors industry," according to a statement from S&P Dow Jones Indices. With a market capitalization of approximately $3.39 trillion, Nvidia is the second-largest publicly traded stock on a U.S. exchange, falling just behind Apple. In stark contrast, Intel's market cap stands at roughly $99 billion, significantly smaller than Nvidia's, making it less representative of the current U.S. tech landscape where AI technology is paramount.

The Dow Jones Industrial Average features 30 large-cap stocks intended to mirror the broader U.S. stock market and, by extension, the U.S. economy. Historically, this index included a variety of heavy industrial and energy companies until technology firms began to dominate the landscape in the past few decades. Currently, major tech companies such as Amazon, Apple, and Microsoft are also included in the Dow.

How Did Nvidia’s Stock Split Contribute to Its Inclusion in the Dow?

The DJIA operates on a price-weighted basis, meaning that higher-priced stocks influence the index's performance more than lower-priced stocks. This characteristic often excludes very high-priced stocks from inclusion, as they would disproportionately affect the index's value. Nvidia’s 10-for-1 stock split in June significantly reduced its share price, allowing it to be considered for inclusion in the Dow. Before the split, Nvidia shares traded at about $1,353 each, making it unlikely for the stock to enter the index.

What Are the Benefits of Nvidia Joining the Dow Jones Industrial Average?

Becoming a Dow component will likely benefit Nvidia and its shareholders, as investment funds and exchange-traded funds (ETFs) designed to track the DJIA will be required to purchase Nvidia shares. This surge in demand could drive the stock price higher.

Nvidia shareholders can look forward to more good news, as the company is expected to announce its quarterly results for the period ending October 27 on Wednesday, November 20.

Nvidia, Intel, Stock