The semiconducter industry is in the midst of a major shift as NVIDIA will replace Intel on the Dow Jones Industrial Average tomorrow. The change, which was announced by S&P Dow Jones Indices late last week, brings to an end Intel’s 25-year run on the Dow Jones. The rise of NVIDIA, which CNBC reports includes a 240% increase in share prices last year, and a rise of over 170% so far in 2024, is thanks largely due to the company’s focus on building AI chips.
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Conversely, Intel is currently the lowest-performing entity on the Dow, with Ars Technica reporting the company’s stock has experienced a 54% drop so far this year. The shift is predictably hitting Intel hard, as the chipmaker last week revealed it has approved cost and capital reduction activities, which includes the layoffs of nearly 17,000 employees.
In addition to NVIDIA’s AI-centric approach, analysts point that the company’s recent GPU strategy has also aided its sudden growth.
“You need CPUs to light up the GPUs but from a metric value, GPUs are a larger portion of the growth,” Chief Analyst at Moor Insights and Strategy Patrick Moorhead tells The Registrar. “Second, is the higher value of a solution (CPU+GPU+networking+even cables) from the individual piece parts. Total solutions are looked at as better for time-to-market and even reliability. A decade or two ago it would have mattered as the Dow represented stability while the NASDAQ was looked at as riskier, but today no.”
“The index changes were initiated to ensure a more representative exposure to the semiconductors industry and the materials sector respectively,” reads S&P Dow Jones Indices announcement.
