The Dow Jones Industrial Average will now include Nvidia Corp. instead of Intel Corp. This shows a change in the guard in technology and the fall of a once-dominant company.
Dow Jones Market Data says that Intel INTC 7.81% joined the Dow DJIA 0.69% exactly 25 years ago. However, the company has lost its top spot as a chip giant because it hasn’t kept up with the latest trends. A lot of hot chip stocks have hit new highs lately, but Intel’s record close was in 2000, and the stock is now trading 69% below that level.
This year, the company’s problems have been very clear. For example, Intel had to pay almost $19 billion in restructuring costs in the last quarter as it tries to get back on track.
The company has missed the boat on artificial intelligence so far, which is one of its problems. Thursday, management admitted that the company wouldn’t make its $500 million annual goal for Gaudi AI income. That goal was already a low one, given how much money AI leaders are making.
On the other hand, Nvidia NVDA 1.99% has become the face of artificial intelligence. In the past two years, the company’s shares have gone up about 850%, and its data-center sales have grown quickly thanks to its graphics processing units, which make AI tasks easier.
Therese Poletti, a columnist for MarketWatch, pushed for this index change in August because of their different situations.
Intel stock is down 38% so far this year, while Nvidia stock is up 220%. During Friday’s extra session, Nvidia’s stock went up 2% and Intel’s stock went down about 2%.
This year, the Dow Jones Industrial Average has fallen behind the S&P 500 0.41%. The Dow has gained almost 12%, while the S&P 500 has gained 20%.
Still, there are stories that show how dangerous it can be for indexes to add hot names right after big runs. Dow Jones Market Data says that Intel’s stock has dropped about 39% since it joined the Dow in 1999, even though it was a big hit in the 1990s. The S&P 500 also added the hot stock Super Micro Computer Inc. (SMCI -10.51%) earlier this year. However, that stock has lost all of its year-to-date gains because the company is being questioned about its accounting and is having trouble making ends meet.
There are other changes to the Dow as well. Paint and coatings company Sherwin-Williams Co. (SHW-0.22%) will replace Dow Inc. (DOW -0.83%) in the index. That change will happen before the market opens on Nov. 8, along with the switch between Nvidia and Intel.
S&P Dow Jones Indices said in a release Friday that the changes to the indices were made to make sure that they gave investors a better look at the semiconductors business and the materials sector. Early this year, the group added Amazon.com Inc. (AMZN 6.19%) and took away Walgreens Boots Alliance Inc. (WBA 0.00%) in an effort to reflect “the changing nature of the American economy.”
Since the Dow is based on price, stocks with low prices don’t have much of an effect. At $23.20 at the end of the day on Friday, Intel stock had the lowest price in the Dow. S&P While Dow Inc. had the smallest market capitalization in the index (it closed Friday at $48.97), Dow Jones Indices said that “persistently lower-priced stocks have a minimal impact on the index.”
Dow Jones Market Data says that Travelers Cos. Inc. (TRV -0.12%), which is worth $56 billion, would be the smallest part of the market after Dow Inc. leaves. If you look at price, Verizon Communications Inc. stock VZ -1.83%, which finished Friday at $41.36, would be the lowest.
S&P Dow Jones Indices is also adding Vistra Corp. VST -4.36% to the Dow Jones Utility Average DJU -1.73%. This was done to give investors a more complete picture of the independent power producers and renewable electricity producers business, the company said. The Dow Jones Utility Average is kicking AES Corp. AES -9.85% out of the picture.
So far this year, Vistra’s stock has done better than any other in the S&P 500, rising 210%.
