Nvidia is replacing Intel on the Dow Jones Industrial Average: Here’s why and what that means

For the second time in 2024, the Dow Jones Industrial Average (INDEXDJX: .DJI) is getting a shakeup. Back in February, Amazon replaced Walgreens on the stock market index. Now two more companies are getting kicked off the Dow so that two others can join. And one of the latest additions is none other than AI chip behemoth Nvidia Corporation

Here’s what you need to know about the Dow’s shakeup:

What is the Dow?

The Dow, also known by its full name, the Dow Jones Industrial Average, is a stock market index. An index tracks a selection of stocks on a market and by tracking them it aims to give investors a quick read on how both markets and the U.S. economy in general are doing in any given period.

The Dow weights its stocks by their share price, not the companies’ market caps, and the stocks are chosen based on their industry’s perceived impact on the U.S. economy. (This is why Amazon, a tech giant, replaced Walgreens, a pharmacy chain.) The Dow is owned by S&P Global, which has a committee that decides which stocks are included in the index.

Currently, the Dow is a basket of 30 stocks—no more and no less. That means that when one company joins the Dow, an existing company must leave it.

Why is Nvidia joining the Dow?

For much of the past two years, Nvidia (ticker: NVDA) has had an outside influence in the tech industry—one of America’s most prominent sectors. Nvidia’s chips help power the AI platforms and tools that are becoming central to the lives of consumers and businesses. These platforms include OpenAI’s ChatGPT.

With Nvidia’s rising demand as an AI chip manufacturer, the company has seen its revenue and market cap surge. In the past five years, the company’s stock price is up over 2,500%. Nvidia currently has a market cap of $3.32 trillion, making it one of the most valuable companies on the planet.

It’s no wonder, then, that Nvidia is ascending to the Dow.

Which company is Nvidia replacing on the Dow?

When one company is added to the Dow, another must leave it. In this case, Nvidia is replacing former chip darling Intel (ticker: INTC). The move is a blow to Intel’s reputation. But the once all-powerful chipmaker in recent years has struggled as the company missed the boat on the AI revolution and failed to keep pace with its semiconductor competitors as it tries to make up for lost time.

As Reuters notes, since each stock on the Dow is weighted by its share price, Intel, at a share price of around $21, was the least influential on the Dow. Nvidia’s current share price is around $138.

Announcing the addition of Nvidia to the Dow and the deletion of Intel, S&P Global said in a press release that the change was “initiated to ensure a more representative exposure to the semiconductors industry.”

What other company is leaving the Dow?

IDow Inc. (ticker: DOW), the chemicals company, is also being removed from the Dow. It’s important to note that despite the similar names, Dow, Inc. is not related to Dow Jones.

Dow, Inc. is being replaced by another chemicals company on the Dow, Sherwin-Williams (ticker: SHW).

When do these changes take place?

The change in the Dow lineup will occur before the market opens on Friday, November 8.

How have NVDA and INTC shares reacted to the news?

S&P Global announced the shakeup on Friday. On that day, NVDA shares closed at $135.37, or up nearly 2%. In premarket trading this morning, NVDA shares are currently up about another 2.15% to above $138.

On Friday, INTC shares closed at $23.20, or up about 7.8%. As of the time of this writing, INTC shares are currently down 1.64% in premarket trading to $22.82.