NVIDIA (NVDA, Financial) is set to be included in the Dow Jones Industrial Average, as announced recently. The company’s market capitalization has surged past $3.3 trillion. This inclusion is primarily due to Intel’s diminishing market value, as its stock price has halved this year, significantly reducing its weight in the Dow Jones.
According to Howard Silverblatt, a senior analyst at S&P Dow Jones Indices, a key part of the decision was the underrepresentation of the semiconductor industry in the index. At the last closing, Intel’s stock price was merely $23 per share, making it unsuitable as a Dow component.
S&P Dow Jones Indices announced that on November 8, Intel will be replaced by its competitor NVIDIA. NVIDIA has now become the world’s second-largest publicly listed company, following Apple. Out of the top six tech companies by market value, four will now be part of the Dow, with exceptions being Alphabet (Google's parent company) and Meta Platforms.
The Dow is a price-weighted index, meaning that stock weights are based on their price rather than market value. Intel's significant stock price drop, influenced by its loss of market share in both the AI domain and core PC/data center processor market, resulted in it being the lowest-weighted company in the Dow at less than 0.5%.
With NVIDIA's addition, the tech sector's representation in the Dow will increase from 18.9% to approximately 19.5%, even though its U.S. market cap weighting stands at around 58%. Simultaneously, Sherwin-Williams will replace Dow Chemical in the index, boosting the materials sector's weight from less than 1% to about 5%.
While there has been speculation about Alphabet and Meta joining the Dow, current representation from the tech sector is substantial, leaving limited room for new additions. Moreover, Meta, if included, would have the highest weighting with its current stock price of approximately $562, surpassing UnitedHealth Group. An adjustment would require replacing an existing member, as the Dow maintains its 30-company structure.
