Nvidia Enters Dow Jones Industrial Average, Intel Exits

The well-known artificial intelligence (AI) chip manufacturer, Nvidia, saw its stock rise by nearly 3% in Friday's after-hours trading. This announcement came just after the market closed when S&P Dow Jones Indices revealed that Nvidia will replace Intel in the Dow Jones Industrial Average (commonly referred to as "the Dow"), which is the oldest stock index in the United States.

As a result of this news, Nvidia's stock enjoyed a gain of 2.9%, while Intel's stock fell by 1.9% during the same trading session.

Timing of Nvidia's Addition to the Dow Jones Industrial Average

Nvidia will officially take Intel's place in the Dow before the market opens on Friday, November 8.

Intel has been a part of the Dow since 1999, a time when it was added during the boom of the dot-com era.

Reasons for the Change from Intel to Nvidia

The decision to replace Intel with Nvidia in the Dow index aims to provide "more representative exposure to the semiconductors industry," as stated in the S&P Dow Jones Indices press release. This adjustment is logical considering Nvidia's impressive market capitalization of $3.39 trillion, making it the second-largest publicly traded stock in the U.S., just behind Apple. Conversely, Intel's market capitalization stands at $99 billion, which is only 1/34th of Nvidia's size. Nvidia's prominence is particularly significant in today's tech landscape, as it leads in providing chips and technology that foster AI applications.

The Dow Jones Industrial Average is made up of 30 large, well-known companies and aims to reflect the U.S. stock market and economy. Historically, the index included mainly heavy industry and energy stocks but has gradually seen a rise in technology stock representation in recent years, as these companies have gained more significance.

Currently, major technology firms, often referred to as the "Big Techs," including Amazon, Apple, and Microsoft, are part of the Dow.

Impact of Nvidia's Stock Split on Its Dow Inclusion

The Dow is a price-weighted index, meaning that the stock prices of its 30 components dictate their influence on the index's performance. As a result, stocks trading at higher prices can create an imbalance; therefore, very high-priced stocks typically struggle to be included. Nvidia's decision to conduct a 10-for-1 stock split in June brought its trading price down enough to make it a candidate for Dow inclusion.

Nvidia's stock closed at $135.37 before the announcement. Without the stock split, it might have been trading at around $1,353 per share. At such a price, its inclusion in the Dow would have been unlikely.

Advantages of Joining the Dow for Nvidia and Its Shareholders

Being part of the Dow means that various mutual funds and exchange-traded funds (ETFs) designed to mirror the Dow's performance will need to acquire shares of Nvidia. This surge in demand is expected to place upward pressure on Nvidia's stock price.

The positive momentum continues for Nvidia investors, who hope that the upcoming quarterly results announcement on Wednesday, November 20, will add to the positive outlook.

John Mackey, the former CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Beth McKenna has positions in Nvidia. The Motley Fool has positions in and recommends Amazon, Apple, Microsoft, and Nvidia. The Motley Fool also recommends Intel and has the following options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short November 2024 $24 calls on Intel. The Motley Fool maintains a disclosure policy.

Nvidia, Intel, Dow