From Nasdaq:

This week, the Dow Jones Index added Amazon and replaced Walgreens Boots Alliance in its 30-stock roster, marking the first change since 2020. As the index modernizes, should it consider adding Nvidia? The Dow’s 30 constituents are determined by stock prices, unlike the market cap-weighted S&P 500 Index.

Inclusion in indices like the Dow is generally beneficial for a stock, as passive funds tracking the index must buy the stock, leading to higher prices. It also serves as an endorsement of the company’s future growth prospects, as seen with Tesla’s entry into the S&P 500 in 2020. Nvidia, a leader in AI, may warrant consideration for the Dow.

S&P Dow Jones Indices replaced Walgreens with Amazon to maintain retail sector exposure following Walmart’s stock split. Uber also replaced JetBlue in the Dow Jones Transportation Average to tap into the ride sharing industry. Given the growing significance of the AI sector and Nvidia’s dominance, its inclusion in the index would accurately reflect the evolving economy.

Nvidia’s high share price poses a challenge for its inclusion in the Dow, potentially skewing its weight in the price-weighted index. A stock split, similar to Walmart’s that facilitated Amazon’s entry, could improve Nvidia’s chances. Excluding such a significant player in the AI space from the index could result in a misrepresentation of the market and economy.



Read more at Nasdaq: Should Nvidia Become the Next Dow Jones Stock After Amazon?