For well over a century, the Dow Jones Industrial Average (DJINDICES: ^DJI) has served as a barometer that gauges the health of the U.S. stock market.
When the Dow Jones was officially incepted on May 26, 1896, it was comprised of a dozen companies, most of which were tied to the industrial sector. Today, it contains an assortment of 30 historically profitable, time-tested, industry-leading businesses.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free "
Over the last 128 years, this iconic index has undergone 52 meaningful changes, excluding components altering their name or existing Dow constituents merging. The most recent change had been Amazon entering the index and pharmacy chain Walgreens Boots Alliance getting the heave-ho in February -- that is, until today.
Before trading begins on Friday, Nov. 8, a new era will begin for the Dow Jones Industrial Average.
The 53rd change to the components of the Dow Jones will see artificial intelligence (AI) leader Nvidia (NASDAQ: NVDA) enter the Dow and legacy semiconductor company Intel (NASDAQ: INTC) head for the exit.
Aside from being late to the AI party, Intel has the lowest share price within the Dow. Unlike the market cap-weighted S&P 500 and Nasdaq Composite, where larger companies exert more influence on these respective indexes, the Dow is a share price-weighted index. Market cap is irrelevant in the context of affecting the Dow's point value.
Significant losses tied to Intel's Foundry division, which it's building from the ground up, as well as central processing unit market share losses to Advanced Micro Devices, made Intel a virtual non-factor for this 128-year-old index.
Meanwhile, Nvidia's largest-ever stock split (10-for-1) in June paved the way for it to become one of the 30 components in the Dow. Without this split, Nvidia would be pushing close to $1,400 per share, which wouldn't have worked with the Dow's share price-weighted formula.
The addition of Nvidia gives the mature stock-focused Dow a new growth component, as well as positions the index to take advantage of the rise of AI. According to the analysts at PwC, the combination of productivity gains and consumption-side effects tied to the AI revolution can add $15.7 trillion to the global economy by 2030.
Nvidia's hardware is at the center of the hype surrounding artificial intelligence. Its H100 graphics processing unit (GPU) and next-generation Blackwell GPU are the brains behind the split-second decision-making needed to run generative AI solutions and build/train large language models. Over a three-year stretch, Nvidia's full-year sales are expected to climb from a reported $27 billion to an estimated $179 billion -- and AI accounts for pretty much the entirety of this projected increase.