Nvidia Corporation, a leading company in the artificial intelligence sector, is scheduled to replace Intel Corporation in the Dow Jones Industrial Average, as announced by S&P Dow Jones Indices. This change will take effect before trading begins on November 8. Additionally, Sherwin-Williams Company will join the index, replacing Dow Inc.
This shift reflects Nvidia's remarkable growth, with the company's stock skyrocketing nearly 900% over the last two years due to the AI boom. Until this announcement, the Dow was the only major U.S. equity index not to include Nvidia, highlighting a significant shift in the index’s composition.
Scott Colyer, CEO of Advisors Asset Management, commented on Nvidia's inclusion, stating that it underscores the company's effective management and remarkable performance during a transformative period for the tech industry. Nvidia’s market capitalization currently stands at approximately $3.32 trillion, making it just $50 billion shy of Apple Inc.'s valuation, positioning Nvidia to potentially surpass Apple as the most valuable company in the near future.
In contrast, Intel has faced numerous challenges, leading to a substantial decline in its stock price—down 54% this year alone. Adam Sarhan, founder of 50 Park Investments, pointed out that Intel's struggles highlight the Dow's ongoing evolution to feature more competitive companies.
The Dow Jones Industrial Average has transformed over its 128-year history from an index of 12 stocks to one that now includes 30 companies across various sectors, including technology, finance, and healthcare. The index is managed by a committee that selects its components based on share price rather than market capitalization.
This alteration marks the second time the Dow has adjusted its composition in 2024, following Amazon's replacement of Walgreens Boots Alliance in February. As the index continues to evolve, it remains a key indicator of American industrial strength, despite a growing reliance on market-capitalization-based indices.
Nvidia's recent stock splits have played a crucial role in facilitating its inclusion in the Dow, as previous high share prices had impeded its entry. With shares closing at $135.40 on Friday, Nvidia's addition to the Dow is likely to attract significant investor interest, marking a new chapter for both the company and the index.
