In a recent development that is bound to catch the attention of many in the semiconductor industry, it has been announced that Intel will be replaced by transfusing Nvidia into the Dow Jones industrial average starting November 8. The transition further emphasizes on the significant changes taking place in the sphere mostly caused by the rise in artificial intelligence technology.
In 2024, Nvidia has seen a more than 170% rise with Nvidia stocks after a shocking turn of events saw 240% appreciation in the year 2023 alone, clearly showing the market frenzy around the AI chip maker’s stock. These projections are in contrast to the reality that Intel has been experiencing where its stocks have gone down by more than 50% this year due to stiff competition and challenges in retailing its strategies. Coming into Friday, Nvidia’s market valuation stood at about $3.3 trillion, making the company ranked second in public market value after Apple.
Along with their downgrade, it has also been announced that Sherwin-Williams will take the place of Dow Inc. This is the first such revision in the index since February when Amazon incorporated in the index, indicating the trend of adding more technology-based businesses to the blue-chip index remains active. At this time in history, out of the six trillion-dollar tech companies, four are already in the Dow Jones, with only Alphabet and Meta being absent.
The company owes its rapid expansion primarily to computer graphics processors (GPUs), which are now sought after by Microsoft, Meta, Google, Amazon, and other tech corporations. These companies have been buying up Nvidia H100 GPUs to aid on their AI strategies. Nvidia boasted a revenue over the last five quarters that is more than double that of its previous revenue, and 3 out of those 5 quarters had revenue tripling every year.
The company anticipates continued high demand for its next-generation AI GPU, Blackwell, describing it as insane.
On the Other hand, we can say that Intel is losing market share, due to the entry of new players such as Advanced Micro Devices (AMD) and its inability to keep pace with AI. Because of the difficulties facing Intel, the company has decided to implement more aggressive cost-cutting strategies than ever before, including the reduction of 16,500 workers and a downsizing of its real estate portfolio.
The DJIA is composed of 30 stock and is price weighted as opposed to market capitalization index, which was relevant in light of Nvidia’s inclusion after its most recent 10-1 stock split. This split effectively reduced the share price by 90%, allowing Nvidia to join the index with a more manageable weight.
This latest change in the Dow reflects broader shifts in the technology landscape and highlights the growing prominence of AI in driving market dynamics.
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