Changing of the guard as Intel is replaced on Dow Jones by Nvidia

After 25 years in one of America’s oldest and most prestigious indices, Intel has been replaced by Nvidia in the basket of 30 stocks that make up the Dow Jones industrial average.
Nvidia is the latest big tech company to step into the 128-year-old Dow’s fold as part of an economic changing of the guard, after Amazon replaced Walgreens in February.
The change was made on Friday morning, before the US markets opened, “to ensure a more representative exposure to the semiconductors industry”, S&P Global, which runs the Dow, said in a press release.
It is a reputational blow for Intel, which was the first listed tech company to join the group along with Microsoft in 1999, and marks the end of an era for the semiconductor veteran.
Intel, founded in 1968, was one of the businesses to put the silicon into Silicon Valley, designing and manufacturing microchips for the burgeoning computer industry. Its dynamic random-access memory (DRAM) chip, released in 1970, was the first to store a significant amount of information.
In the world of semiconductors its younger rival Nvidia, founded in 1993, has seen its star rise along with its share price, which is up 220 per cent in the past year. Its graphics processing units (GPUs), originally used in the computer graphics industry, are highly prized for their use in artificial intelligence.
As AI is booming, so too is demand for GPUs. In the second quarter of the year Nvidia revealed sales of $30 billion, up 15 per cent from the previous quarter and a rise of 122 per cent from the year before.
Intel missed opportunities in the mobile market through the rise of smartphones, where Arm now dominates. In 2005 Intel decided not to buy Nvidia, according to reports in The New York Times, and it declined an early opportunity to invest in OpenAI.
In contrast to Nvidia’s meteoric rise, Intel’s share price has dropped more than 30 per cent in the past year to around $26. In the third quarter of the year it reported revenue of $13.3 billion, down 6 per cent from the same period last year. Under Pat Gelsinger, its chief executive, it is undergoing a strategic transformation.
Unlike Intel, Nvidia designs but does not produce its own chips, relying heavily on Taiwan Semiconductor Manufacturing Company, an Intel rival.
In terms of the real-world impact the Dow Jones switch is mainly symbolic, as most funds track the S&P 500 rather than the Dow.
The index was set up in 1896 by Charles Dow, who began calculating a daily average of 12 big stocks — which built up to 30 by 1928 — as a way of acting as the market’s benchmark.
The stocks in the index are chosen by a committee based on their “perceived impact on the US economy”, with the share price a key element for inclusion.
It is reviewed on an “as-needed basis” and S&P Global says: “To preserve continuity, changes are rare. Replacing a stock generally requires a significant change in a constituent company’s core business or a major corporate action, such as an acquisition.”
Along with Nvidia, Sherwin-Williams, a paint maker, will replace the commodity chemical maker Dow, which is no relation to the index.
In a strange quirk, because the index is weighted by share price rather than market value, Sherwin-Williams, which trades at about $387, will make up a greater percentage of the Dow than Nvidia, whose shares trade for about $148. Nvidia’s market capitalisation is $3.6 trillion compared with Sherwin’s $97.6 billion.