Nvidia Shares Join Dow Jones Industrial Average, Intel Boots

Nvidia (NVDA 1.99%) stock investors got some good news to start their weekend. The S&P Dow Jones Index announced after market close on Friday that the artificial intelligence (AI) chip giant will replace its fellow chipmaker. Intel (INTC 7.81%) V Dow Jones Industrial Average (^DJI 0.69%)the oldest US stock index.

Not surprisingly, Nvidia shares rose while Intel shares fell in after-hours trading on Friday. Nvidia shares rose 2.9%, while Intel shares lost 1.9%.

When will Nvidia join the Dow Jones Industrial Average?

Nvidia will replace Intel in the Dow Jones Industrial Average (commonly referred to as the “Dow”) before the market opens on Friday, November 8th.

Intel has been a member of the Dow Jones Industrial Average since 1999, having been added during its dot-com era heyday.

Why is Nvidia replacing Intel in the Dow?

Nvidia replaces Intel in the Dow to “provide a more representative share of the semiconductor industry,” S&P Dow Jones Indices said in a press release.

This makes sense since Nvidia’s whopping $3.39 trillion market capitalization makes it the second-largest traded stock on the US exchange, behind the leader. Apple by a small margin. Meanwhile, Intel’s market capitalization is $99 billion – just 1/34 the size of Nvidia. Moreover, Nvidia is far more prominent than Intel in the current US technology landscape, as it is the largest player in supplying chips and related technologies that enable artificial intelligence capabilities.

As background, the Dow Jones Industrial Average is a 30-large stock index that seeks to be representative of the US stock market, which in turn is generally a reflection of the US economy. Thus, in the first decades of its history (it was launched in 1896), it was primarily composed of heavy industrial and energy stocks. Technology stocks have been added to the Dow Jones Industrial Average in recent decades as they have become increasingly dominant in the U.S. stock market.

Three of the so-called “Big Techs” – the largest technology companies traded on US stock exchanges – AmazonApple and Microsoft — current components of the Dow Jones Industrial Average.

How did Nvidia’s 10-for-1 stock split in June pave the way for its inclusion in the Dow?

The Dow is price-weighted, meaning each of its 30 components receives a weight based on its price. Thus, components of stocks that trade at higher prices affect the performance of the Dow Jones Industrial Average more than those that trade at lower prices.

This means that extremely expensive stocks have little chance of being included in the Dow Jones Industrial Average because they would have too much of an impact on the price of the index. Thus, Nvidia’s 10-to-1 stock split in June made it considered an addition to the Dow.

Nvidia shares closed at $135.37 in regular trading on Friday. If the company had not undergone a stock split, it would have traded at around $1,353 per share. (I say “approximately” because the stock likely benefited a little from the stock split.) At this price, there is no way to add it to the Dow.

How will Nvidia and its shareholders benefit from being added to the Dow Jones Industrial Average?

Dow membership means that mutual funds and exchange-traded funds (ETFs) designed to track the Dow will have to buy Nvidia shares. This increased demand should put upward pressure on the share price.

The good news continues to roll in for Nvidia stock investors. Let’s hope Wednesday, November 20, brings more positive news. That’s when Nvidia reports its quarterly results for the period ending October 27th.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Beth McKenna has positions at Nvidia. The Motley Fool has positions and recommends Amazon, Apple, Microsoft and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2026 $395 Microsoft calls, short January 2026 $405 Microsoft calls, and short November 2024 $24 Intel calls. The Motley Fool has a disclosure policy.