The Dow Jones Industrial Average is set for a significant adjustment as Nvidia (NVDA, Financial) replaces Intel in its index, with changes becoming official on November 8. This announcement led to Nvidia's shares increasing by 2.89%, while Intel's shares declined by 1.81%.
In addition, FTSE Russell has declared adjustments to its U.S. style indices, aiming to limit the weight of large components. The changes involve stocks worth over $7 trillion and suggest significant rebalancing of stock funds that mirror these indices. FTSE Russell plans to enforce a weight limit where no company's market value in a style index surpasses 22.5%, beginning in March next year, with quarterly reviews to follow.
The change in the Dow was also bolstered by Nvidia’s strategic 1-for-10 stock split earlier in the year, positioning it for inclusion due to its impressive market representation and strong growth trajectory, particularly in AI and chip manufacturing. Nvidia's shares have surged by over 170% this year, reaching a market cap of $3.32 trillion.
Meanwhile, Intel faces significant challenges, with its stock down by over 53% year-to-date, marking a rare crisis in its 56-year history. Intel was part of the Dow Jones index for 25 years before this shift.
Alongside Nvidia, Sherwin-Williams replaces Dow Inc., marking the index’s first update since February. This change aligns with insights from industry strategies, emphasizing the need for an index that accurately reflects technological market dynamics.
As U.S. elections approach, there is considerable scrutiny on the implications for the stock market. Analysts suggest market movements will depend heavily on the election outcomes. Citigroup advises caution with Trump-related trades, recommending profit-taking on positions influenced by his policies. Despite the looming volatility, Citigroup maintains an "overweight" stance on U.S. equities, anticipating a favorable performance towards year-end.
