Alongside NVIDIA, Sherwin-Williams, a paint manufacturer, will also join the index, replacing chemical company Dow Inc. These changes, effective November 7, were announced by S&P Dow Jones Indices and reflect an effort to represent the semiconductor and materials sectors more accurately.
Why the Shift? AI Demand and Market Realities
NVIDIA’s inclusion in the Dow Jones comes as demand for AI technology surges across industries. Known for designing chips specifically geared towards running AI systems, NVIDIA has rapidly gained market share, while Intel has struggled to maintain relevance in the AI-driven world of chip manufacturing.
Intel’s performance in 2024 underscores these challenges. Its stock price has dropped over 50% year-to-date, falling to $23.20. The company’s third-quarter revenue also reported a 6% decline year-over-year, totaling $13.3 billion. Facing a decline in its traditional markets, Intel’s CEO, Pat Gelsinger, has expressed intentions to streamline operations and reduce costs. However, this has not been enough to keep the company in the Dow.
NVIDIA, on the other hand, has seen its stock skyrocket by over 173% this year, hitting $135.40. Unlike Intel, NVIDIA focuses on chip design rather than manufacturing, relying heavily on partners like Taiwan Semiconductor Manufacturing Company (TSMC) for production. This approach has enabled NVIDIA to focus on innovation in high-demand areas like AI and gaming, securing its position as a frontrunner in the semiconductor industry.
Market Impacts and Sector Representation
The Dow Jones is a price-weighted index, meaning lower-priced stocks like Intel had minimal influence on its overall performance. Intel’s ongoing drop in value made it less impactful within the Dow, paving the way for NVIDIA’s entry. NVIDIA’s addition brings a fresh representation to the index, aligning with the S&P Dow Jones Indices’ goal to ensure relevant exposure in the semiconductor sector.
Sherwin-Williams’ inclusion also brings enhanced visibility to the materials sector, as it replaces Dow Inc., a key player in chemicals and plastics but the smallest company by market cap in the index.
Other Changes in the Dow Jones Utility Average
In a separate development, the Dow Jones Utility Average will see Texas-based Vistra Corp replace Virginia-based AES Corp, reflecting similar goals of better sector representation.
These adjustments highlight a pivotal shift towards AI and innovation-focused companies in the U.S. economy. As NVIDIA and Sherwin-Williams step into the spotlight, this restructured Dow Jones Industrial Average signals a new era driven by technology and adaptability.