- Nvidia recently overtook Apple as world’s largest company
- Chipmaker replaces peer Intel
- Unlikely to impact Nvidia’s share price
Every Brit expected fireworks on 5th November but there where more in store on Friday (8 Nov) for investors, as news broke that Nvidia (NVDA:NASDAQ) will replace Intel (INTC:NASDAQ) in the Dow Jones Industrial Average.
Rumours of the change had been swirling ever since Nvidia’s 10-for-1 stock split back in June and the shares’ stunning run this year – they are up more than 200% since January.
Currently the world’s biggest company worth $3.6 trillion, Nvidia won’t dominate the Dow weightings the way it does the S&P 500 or Nasdaq. That’s because the Dow works differently to its larger index peers. Where they weight each company based on market capitalisation, the Dow does not, instead ranking each of its 30 members by share price, highest to lowest.
This means that even though Nvidia recently overtook Apple (AAPL:NASDAQ) as the world’s most valuable company, the top spot in the Dow belongs to UnitedHealth (UNH:NYSE), with a share price north of $615 right now.
WHY NOW?
Nvidia’s pre-split price of $1,000-plus was too high for the index but that changed when it split its stock into 10. So now, at around $147, Nvidia will carry roughly the same weight as 3M (MMM:NYSE) and Boeing (BA:NYSE), at roughly $134 and $152 respectively.
That said, thanks to Nvidia’s volatility, or how much stock is regularly traded, it will rank as the eighth-largest influence on the index’s daily movements, according to market data.
Still, don’t expect Nvidia’s Dow inclusion to impact the stock price performance very much because, while the Dow is famous, it’s far less popular among investors than other indices.
For example, the largest UK-listed S&P 500 ETF, the iShares Core S&P 500 ETF (GSPX) manages more than £80 billion of investor funds, versus the largest Dow ETF, the iShares Dow Jones Industrial Average (CIND), which has barely £1 billion of assets under management.
The switch is the first change to the index since February 2024, when Amazon (AMZN:NASDAQ) replaced Walgreens Boots Alliance (WBA:NYSE).
