Nvidia Boots Intel from Dow Jones as AI-Driven Growth Redefines the Chip Industry Giants

Nvidia will replace Intel in the Dow Jones Industrial Average on Nov. 8, a move highlighting AI’s reshaping of the chip industry. With Nvidia’s market cap surging amid record AI chip sales, Intel’s historical dominance in tech is facing a stark reality.

AI Surge Redefines the Dow Jones Landscape

The blue-chip index is seeing some changes as a result of the surge in AI and a sea change in the semiconductor industry, with Nvidia displacing Intel as an index component.

During Friday's extended session, Intel shares fell 1%. A one percent increase was seen by Nvidia stockholders.

On November 8th, the change will occur. S&P Dow Jones also announced that Sherwin Williams would be replacing Dow Inc. in the index.

Nvidia's Market Cap and Investor Appeal Soar

Investors have flocked to acquire a piece of the artificial intelligence chipmaker Nvidia, sending its shares up over 170% so far in 2024, following a roughly 240% increase last year. Among publicly traded companies, Nvidia now ranks second with a market valuation of $3.3 trillion, behind only Apple.

In order to construct computer clusters for artificial intelligence (AI) tasks, several companies are buying graphics processing units (GPUs) from Nvidia, including Meta, Amazon, Google, and Microsoft.

Per CNBC, over the last five quarters, Nvidia has seen a doubling or tripling of its revenue. Demand for Blackwell, the company's next-generation artificial intelligence GPU, is "insane," according to the signal.

Tech Giants Strengthen Their Presence in the Dow

Nvidia brings the total number of tech businesses in the index to four, bringing the total value to six trillion dollars. Of them, only Alphabet and Meta are not included in the Dow.

In contrast to Nvidia's meteoric rise, Intel's stock price has been falling. After years of dominating the PC chip business, Intel has seen its position eroded by Advanced Micro Devices and has achieved surprisingly little progress in artificial intelligence.

Intel Faces Competitive and Operational Challenges

The stock price of Intel has dropped by almost 50% so far this year due to the company's production issues and the emergence of new competitors in the central processing unit market.

A reduced headcount of 16,500 and real estate footprint reduction were among the cost and capital reduction measures approved by the board's audit and finance committee, according to a filing by Intel this week. The layoffs were first reported in August.

Nvidia's Stock Split and Entry into the Dow

Instead of using market capitalization as a weight, the 30 stocks that make up the Dow are weighted according to their share prices. By announcing a 10-for-1 stock split in May, Nvidia improved its chances of joining the index.

The action reduced the share price by 90% without affecting the company's market cap, enabling it to join the Dow without having an excessively large weighting.

Amazon supplanted Walgreens Boots Alliance in February, marking the only index change since then.

In its pursuit of exposure to the leading technological businesses, the Dow has been playing catch-up throughout the years. A group from S&P Dow Jones Indices selects the equities that make up the index.