(Bloomberg) — Nvidia Corp., the chipmaker at the heart of the artificial intelligence boom, is joining the oldest of Wall Street’s three major stock benchmarks.
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The company will replace rival Intel in the 128-year-old Dow Jones Industrial Average before trading begins on Nov. 8, S&P Dow Jones Indices said in a statement late Friday. Sherwin-Williams is also joining, replacing Dow Inc.
Nvidia’s addition to the blue-chip index is a testament to the power of the AI-led rally that has propelled the chipmaker soaring 900% in the past 24 months. The Dow Jones Industrial Average was the only major US stock index not to hold Nvidia — yet.
“Nvidia is a well-run company, and joining the Dow shows how strongly it has risen in recent years after being in the right place at the right time when no one else was,” said Scott Collier, CEO of Advisors Asset. administration.
The Santa Clara, California-based company has been the poster child for the euphoria surrounding artificial intelligence and the biggest driver of stock market gains. The chipmaker ended the week with a market cap of $3.32 trillion, about $50 billion shy of Apple Inc. Shares rose 3.2% in after-market trading, putting Nvidia in position to unseat Apple as the world’s most valuable company on Monday. If the gains continue.
Intel joined the standard in November 1999 when it was added with Microsoft Corp. SBC Communications and Home Depot Inc. Intel, once the industry leader in computer processors, has recently been struggling with its turnaround plan. The company will cut spending in 2024, cut jobs and suspend payments to investors. Shares have lost 54% this year, and fell another 2% after the bell.
“Intel has lagged significantly,” said Adam Sarhan, founder of 50 Park Investments. “Now, the Dow Jones is evolving. You don’t want to see stocks that were around 30 years ago. You want to see what’s the strongest that survives today.”
Dow, based in Midland, Michigan, has been in the blue-chip index since 2019, when it was spun off from former parent DowDuPont.
The Dow Jones Industrial Average, which first started out as an index of 12 industrial stocks including General Electric Co., faced criticism for being a much narrower measure of stocks than the S&P 500 or Nasdaq 100 and lacking the technology stocks that dominated the markets. In recent years.
This is the second switch this year after Amazon.com Inc. Walgreens Boots Alliance Inc. In February. Before that, the components of the Dow Jones Index had remained flat since August 2020 when Amgen Inc. and Honeywell International Inc. Salesforce.com replaces Exxon Mobil Corp and Pfizer Inc. and Raytheon Co.
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The index has evolved over more than a century into 30 stocks that include a mix of technology, financial, healthcare and consumer sectors. A committee selects the 30 components and weights them by price rather than market value, as the Standard & Poor’s 500 index does.
The Dow’s price-weighted methodology has sometimes been a drag for technology companies that have avoided splits and whose shares often trade at more than $1,000. Those included Nvidia until recently. The company has split its stock twice in the past four years, most recently a 10-for-1 swap that took effect in June. Nvidia shares closed Friday at $135.40.
While the influence of the Dow Jones has faded over the years as passive managers are associated with benchmarks based on market capitalization, the index remains an exclusive club and continues to serve as one of the most prominent displays of American industrial heavyweights.
(Adds stock split details in penultimate paragraph.)
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