Nvidia's inclusion in the Dow index is crucial for chipmakers after Intel's decline.

• On Friday, it was announced that Nvidia had joined the Dow Jones Industrial Average after its impressive market cap surpassed $3.3 trillion.
• The fall of Intel, which has lost more than half its value this year, has left its stock as almost weightless in the Dow.
• According to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, a significant aspect of the decision was that semis weren't being represented.

The Dow Jones Industrial Average no longer includes at around $23 a share.

The S&P Dow Jones committee, responsible for determining when changes should be made to the 30-member index, has concluded that it remains a crucial indicator of the U.S. economy.

On Nov. 8, Intel will be replaced as the second most-valuable public company by a rival chipmaker, which has surged in value to become the world's second most-valuable public company, just behind Apple as of Monday.

The tech industry's six trillion-dollar companies will be represented in the Dow by four companies, with two internet giants remaining on the outside. There are no obvious replacements for those two companies. However, Nvidia recently surpassed Intel as the largest chipmaker by revenue, creating a clear one-for-one swap opportunity.

The defining characteristic of the Dow is that it's a price-weighted index, which means a stock's significance is determined by its price rather than the market cap of the company. This year, Intel has experienced a significant decline in its stock price, dropping more than half, after being outperformed by Nvidia in artificial intelligence and losing market share in its core PC and data center processor market. On Friday, Intel's stock closed at $23.20.

Intel, with a weighting of less than 0.5%, is the least-significant member of the Dow, and the next lowest-priced stock is around $41. As the only chipmaker in the index, the sector is underrepresented relative to its position in the economy.

"Sector representation and price are crucial factors in the decision-making process, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices."

Nvidia's stock price will give it just the 21st highest weighting on the market, despite its market cap being worth an outsized 18% of the index. Nvidia positioned itself to join the Dow in May by announcing a 10-for-1 stock split.

Silverblatt stated that the technology industry's representation in the Dow will increase to approximately 19.5% from 18.9%, despite its market weight being around 58%. The larger weighting shift will occur with the addition of new members and replacement of the materials sector, which will bring the materials sector's weight to about 5% from less than 1%, Silverblatt said.

The wait for Alphabet and Meta to join the Dow could continue for a long time, as their positions in the index are still being considered. Alphabet's Class A and Class C stocks are both publicly traded, which complicates its position in the Dow. Meanwhile, Meta's price of almost $562 would currently give it the heftiest weighting in the Dow, just ahead of .

The increased visibility of technology has made it difficult to identify any clear next steps for Silicon Valley's largest companies.

"Silverblatt stated, "To add a stock to the Dow 31, you must remove another one.""

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