The swap reflects their reversal of fortunes within the tech industry and would have been unthinkable a few years ago

By Jack Pitcher

Nov. 1, 2024 6:00 pm ET

Big Tech customers are investing in AI systems that need Nvidia’s graphics processing units. Photo: Annabelle Chih/Bloomberg News
Nvidia will replace Intel in the Dow Jones Industrial Average next week, a swap that reflects their reversal of fortunes within the tech industry. Sherwin-Williams will replace Dow Inc. as well.

S&P Dow Jones Indices, which manages the 30-stock benchmark, said the changes were made to ensure a more representative exposure to the semiconductors industry and the materials sector. They are effective prior to the open of trading on Nov. 8.

For Intel and Dow Inc., the moves are largely symbolic. There should be little practical impact because few funds track the Dow index compared with the larger S&P 500.

For Intel, being replaced by Nvidia would have been unthinkable just three years ago. Now, it underscores one of numerous strategic missteps that have demoted Intel from tech titan to a takeover target: The chip manufacturer largely missed the boat on artificial intelligence, which is developing into a driving force of the U.S. economy.

Intel shares have dropped more than 50% this year after it became clear that Chief Executive Pat Gelsinger’s turnaround plan wasn’t working. Intel paused its dividend, announced billions in cost cuts and said it would lay off 15,000 employees in a nightmare earnings report this summer that accelerated the selloff.

The stock rose 7.8% Friday after the company reported a $16.6 billion quarterly loss but offered hints of optimism. Intel joined the blue-chip index on Nov. 1, 1999.

Nvidia, meanwhile, has become the highflying face of the AI boom. Big Tech customers that are spending big on AI systems can’t get enough of Nvidia’s graphics processing units. Sales, and Nvidia’s stock price, have soared, sending the company to a more than $3 trillion market cap that places it neck-and-neck with Apple for the title of most valuable U.S. company. Shares have risen eightfold since the beginning of 2023.

Dow Inc., meanwhile, had become a smaller company than the original chemical and materials conglomerate after spinning off into three separately traded companies in 2019. Its shares are down slightly over the last five years, while its replacement, Sherwin-Williams, is up about 85%.

Unlike the S&P 500 and the Nasdaq Composite, the blue-chip index is weighted by share price, not by market capitalization. It is calculated by adding the prices of the 30 stocks and dividing by a factor that accounts for changes such as stock splits and index entrants. That means that companies with a higher share price have a greater effect on index moves, regardless of their total market value.

With a share price of $23.20, Intel was by far the least influential stock in the benchmark, while Dow Inc. was No. 28. At $135.40, Nvidia would rank 22nd—it executed a 10-for-1 stock split in June that analysts said made its inclusion in the Dow more likely. Sherwin-Williams closed Friday at $357.97, which would give it the sixth-highest share price in the index.

The Dow has lagged behind the S&P 500 and Nasdaq in recent years because it is less oriented toward technology stocks. It is up 12% this year, while the other indexes have climbed more than 20%. The Dow’s last shake-up came in February, when online retail powerhouse Amazon.com replaced Walgreens Boots Alliance.

A committee composed of representatives of S&P Dow Jones Indices and The Wall Street Journal determines the composition of the index. The committee looks for companies with an “excellent” reputation, sustained growth and high level of interest from investors, according to index methodology.

Changes are made to the index on an as-needed basis. A company must be part of the S&P 500 to be considered for membership in the Dow. The Dow industrials exclude companies in the utilities and transportation industries, which are represented in separate Dow indexes.

Charles Dow, the first editor of the Journal and co-founder of Dow Jones & Co., the publisher of the Journal, created the Dow average to help explain stock-market movements to his readers. An average of 12 stocks was published daily in the Journal beginning in 1896. (An earlier stock average, consisting mostly of railroads, was printed in a predecessor publication in 1884.) The industrial average expanded to 20 names in 1916 and 30 companies in 1928.

Write to Jack Pitcher at jack.pitcher@wsj.com

Corrections & Amplifications
Sherwin-Williams closed Friday at $357.97, which would give it the sixth-highest share price in the Dow Jones Industrial Average. An earlier version of this article incorrectly said Sherwin-Williams closed Friday at $70.94, which would make it among the five stocks with the lowest share price. (Corrected on Nov. 1)

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Appeared in the November 2, 2024, print edition as ‘Nvidia to Replace Intel in the Dow, Sherwin-Williams Will Also Join’.