In a new feat that has added to its trajectory of milestones, Nvidia is set to replace Intel in the Dow Jones Industrial Average, marking a pivotal moment for the semiconductor sector and underscoring the explosive growth of artificial intelligence.

Nvidia’s ascension to the blue-chip index, effective November 8, symbolizes both the strength of the AI boom and the mounting struggles faced by Intel as it grapples with manufacturing challenges and competitive pressures.

Intel’s removal from the index marks an unfortunate end to its longstanding dominance in the chipmaking industry. The California-based company, which once held a firm grip on the personal computing chip market, has seen its position erode in recent years amid a competitive landscape that has shifted focus to AI. The shift has been marked by Intel’s notable loss of market share to rivals like Advanced Micro Devices (AMD) and Nvidia. This shift has been painful for Intel, which recently announced workforce reductions of approximately 16,500 employees and plans to reduce its real estate footprint as part of cost-cutting measures.

Meanwhile, Nvidia’s stock has been on an upward trajectory, soaring over 170% in 2024 alone after gaining an astonishing 240% the previous year. This meteoric rise has been fueled by an AI-driven demand surge, with companies like Microsoft, Google, Amazon, and Meta snapping up Nvidia’s advanced graphics processing units (GPUs) to support their AI infrastructure.

The intense demand for Nvidia’s cutting-edge H100 chips and upcoming Blackwell GPUs underscores its crucial role in the AI landscape, with CEO Jensen Huang stating that demand for these products has reached “insane” levels. Nvidia’s market cap has now swelled to $3.3 trillion, making it second only to Apple among publicly traded companies.

With Nvidia joining the Dow, four of the six tech giants valued over a trillion dollars are now represented in the index, which has traditionally been weighted by the share price rather than the market capitalization of its components. Nvidia positioned itself to join the Dow in May 2024 by conducting a 10-for-1 stock split, which adjusted the price of its shares to meet the index’s weighting criteria without impacting its market cap.

This move facilitated Nvidia’s eligibility for the Dow, which is managed by a committee from S&P Dow Jones Indices.

The addition of Nvidia comes alongside another change, with Sherwin Williams replacing Dow Inc., further diversifying the index’s representation of industries. The last modification to the Dow occurred in February when Amazon took Walgreens Boots Alliance’s place, as the Dow continues efforts to better capture the evolving tech sector and include the most influential players.

Nvidia’s Unprecedented Rise

Nvidia’s remarkable ascent to the top of the tech industry has been driven by its mastery of AI hardware, transforming the company from a niche graphics card manufacturer to a linchpin of modern artificial intelligence. Founded in 1993 and long known for its high-performance graphics processing units (GPUs) in the gaming world, Nvidia’s ability to pivot to the AI sector has redefined its trajectory and, in many ways, the landscape of the entire tech industry.

The core of Nvidia’s unprecedented rise lies in the unique architecture of its GPUs, which are ideally suited for parallel processing tasks integral to AI and machine learning. Unlike traditional central processing units (CPUs), GPUs can process massive amounts of data simultaneously, making them indispensable for AI operations that require high-speed processing of complex algorithms.

Nvidia’s cutting-edge AI chips, such as the A100 and H100 models, have become the go-to solution for companies building AI infrastructure. As global giants like Microsoft, Meta, Amazon, and Google aggressively invest in AI, Nvidia has found itself at the heart of this expansion, supplying the essential hardware that powers the industry’s transformative advancements.

Nvidia’s strategic foresight has also played a role in its Dow inclusion. In May, the company performed a 10-for-1 stock split, reducing its per-share price by 90% without affecting its overall market cap. This stock split was essential for Nvidia’s eligibility for the Dow, as the index is price-weighted, making it difficult for companies with extremely high share prices to enter without having an outsized impact on the index’s balance.

The split was a shrewd move that aligned Nvidia’s profile with Dow’s requirements, ultimately paving the way for the company’s inclusion and expansion of its reach among investors seeking exposure to AI-focused growth within this influential benchmark.

The shift to Nvidia from Intel in the Dow Jones Industrial Average marks a broader shift in the semiconductor industry as well. Once a giant in the PC chip market, Intel has struggled in recent years to adapt to the AI-driven wave that companies like Nvidia have seized upon. While Intel dominated the CPU market for decades, its foothold has weakened with increasing competition from Advanced Micro Devices (AMD) and its slow foray into AI applications, particularly as it faces ongoing manufacturing setbacks. Despite Intel’s attempts to reinvest in new technologies, the company’s market cap has been overshadowed by Nvidia’s rapid growth, leading to a divergence in their industry trajectories.

The implications of Nvidia’s inclusion in the Dow stretch beyond the stock market, signifying the transformation of the tech sector itself. Four of the six trillion-dollar tech companies are now represented in the Dow, highlighting the index’s increased tech weighting as traditional sectors like manufacturing and retail recede in economic influence.

Nvidia’s inclusion is part of the Dow’s ongoing efforts to capture the dynamism of technology, particularly AI, within its portfolio of blue-chip stocks. Additionally, the company’s inclusion means investors now have a more direct opportunity to gain exposure to the AI market’s potential through an established benchmark, which is appealing given Nvidia’s massive expansion in the AI sector.