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A Major Shuffle in the Chip Industry: NVIDIA Gets Included in the Dow Jones Industrial Average, While Intel Gets Excluded!

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Update time : 2024-11-04 11:20:09
After the market closed on November 1 local time, S&P Global released a statement that S&P Dow Jones made adjustments to the Dow Jones Industrial Average. NVIDIA replaced Intel as a component stock, and the change will take effect on November 8. Affected by this, NVIDIA rose more than 1% after - hours trading, while Intel fell more than 0.5%.

S&P Global said that the adjustment of component stocks is to ensure that the index has a more representative semiconductor exposure.

This index adjustment is to ensure higher representativeness of the semiconductor and materials industries. Media analysis said that the inclusion of NVIDIA is a "major restructuring" of this blue - chip index, reflecting the booming development of artificial intelligence and the significant transformation of the semiconductor industry.

As the "gold digger" for AI computing power, NVIDIA's value has achieved a leapfrog development in the past two years. Last year, the stock rose by 239% cumulatively, and on this basis, it has climbed more than 173% this year. Currently, NVIDIA's market capitalization has reached $3.3 trillion, second only to Apple among global listed companies.

With NVIDIA's addition, four of the six companies in the US stock "trillion - dollar market capitalization club" have been included in the Dow Jones component stocks. The only ones not among them are Alphabet, Google's parent company, and Meta Platforms, while Amazon just joined in February this year.

In May this year, NVIDIA announced a 1 - for - 10 split of its common stock. After the split, the share price per share dropped from just over $1,000 to a level slightly higher than $100. At that time, some analysis pointed out that this move might be in preparation for being included in the Dow Jones Industrial Average.

Companies such as Microsoft, Meta, Google, and Amazon are purchasing large quantities of NVIDIA's Graphics Processing Units (GPUs) to build data centers for artificial intelligence work. NVIDIA's revenue in the past five quarters has increased by more than 100% year - on - year, and in three of those quarters, the revenue has at least quadrupled. The company's CEO Jensen Huang has repeatedly stated that the demand for the next - generation AI GPU, Blackwell, is "crazy".

Unlike the S&P 500 index which is "market - value weighted by holdings", the Dow Jones Industrial Average uses "price - weighted", which means that price changes of high - priced stocks have a greater impact on the index level than those of low - priced stocks. This mechanism makes it very difficult for extremely high - priced stocks to be included in the Dow Jones Industrial Average.

Benefiting from the purchases of graphics processors (GPUs) such as the H100 by other technology companies, NVIDIA's performance announced in August showed that the company's quarterly revenue exceeded $300 billion, a 122% year - on - year increase; net profit was $165.99 billion, an increase of 168%.

Last month, NVIDIA CEO Jensen Huang said that the demand for the company's next - generation AI chip, Blackwell, from the outside world is "crazy", "everyone wants to have the most products, and everyone wants to be the first to receive the goods."

Meanwhile, Intel's stock price has been in a free fall, with a cumulative decline of more than 53% this year. As the former world's largest chip manufacturer, Intel has been in a downward trend in recent years, and the decline has accelerated in 2024.

Earlier this week, Intel CEO Pat Gelsinger said during an earnings call that the company is in the process of one of the most groundbreaking restructurings since its establishment in 1968.

In the previous quarter, Intel announced layoffs, spending cuts, and a suspension of dividend payments to investors. It is worth mentioning that Intel was included in the Dow Jones component stocks in 1999, along with Microsoft.
 

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