Nvidia Stock Joins the Dow Jones Industrial Average as Intel Exits

On Friday, Nvidia's stock saw an increase of nearly 3% during after-hours trading. This positive movement comes after the announcement from S&P Dow Jones Indices that Nvidia (NVDA) will be replacing Intel (INTC) in the Dow Jones Industrial Average, the oldest stock index in the United States.

This change indicates a shift in the chip-making landscape, with Nvidia's stock rising by 2.9% in after-hours trading, while Intel's stock fell by 1.9%.

When Will Nvidia Join the Dow Jones Industrial Average?

Nvidia is set to officially become a member of the Dow before the market opens on Friday, November 8. This transition comes as Intel, which has been part of the Dow since 1999, is being removed from the index.

Reasons for the Replacement of Intel with Nvidia

The decision to replace Intel with Nvidia is aimed at providing a more accurate representation of the semiconductor industry within the Dow index, as stated by the S&P Dow Jones Indices. Nvidia has a significant market capitalization of $3.39 trillion, making it the second-largest stock on a U.S. exchange, just behind Apple. In contrast, Intel’s market cap sits at around $99 billion, which is only about one-thirty-fourth of Nvidia's size. Nvidia’s prominence in providing chips essential for artificial intelligence applications further emphasizes its relevance to the current tech landscape.

Historically, the Dow Jones Industrial Average consists of 30 large companies and aims to reflect the overall U.S. stock market, which is seen as a barometer of the U.S. economy. Initially dominated by industrial and energy stocks, technology companies have increasingly been included in recent decades, with major firms like Amazon, Apple, and Microsoft currently part of the index.

The Impact of Nvidia’s Stock Split

Nvidia's recent 10-for-1 stock split has played a vital role in making its addition to the Dow possible. The index is price-weighted, meaning that the price of each stock contributes differently to the overall index performance. A high-priced stock would typically have a more substantial influence, making it undesirable for inclusion. Before the split, Nvidia's stock would have been priced significantly higher at approximately $1,353 per share, which would have likely excluded it from consideration for the Dow.

Benefits of Joining the Dow Jones Industrial Average for Nvidia

Being included in the Dow means that various mutual funds and exchange-traded funds (ETFs) designed to mirror the index will need to purchase shares of Nvidia. This increase in demand could positively impact Nvidia's stock price.

Investors in Nvidia are hopeful for continued good news, with the next significant date being Wednesday, November 20, when Nvidia is scheduled to report its quarterly results for the period ending October 27.

Nvidia, Intel, Stock