Nvidia to Enter Dow Jones Industrial Average: How Do Tech Giants Perform Post-Inclusion?
Nvidia is set to join the Dow Jones Industrial Average, replacing $Intel (INTC.US)$, effective before market open on Nov. 8, S&P Dow Jones Indices announced Friday.
Nvidia Poised to Overtake Apple as Most Valuable Company
Following the announcement, $NVIDIA (NVDA.US)$ shares surged over 2.5% in premarket trading Monday. This trajectory could bolster its market cap to $3.4 trillion at the open, potentially overtaking Apple Inc. as the world's most valuable company.
Nvidia's stock has skyrocketed approximately 240% last year and climbed over 170% this year, currently boasting a market cap of $3.3 trillion.
Amid booming demand for artificial intelligence, tech giants such as Microsoft Corp., Amazon.com Inc., and Alphabet Inc.'s Google are acquiring Nvidia’s GPUs to satisfy AI computing needs. Nvidia's revenue has doubled each of the past five quarters, with profits soaring. CEO Jensen Huang recently described demand for its upcoming AI GPU, Blackwell, as "insane."
Can Nvidia's Shares Sustain Their Rally?
$Dow Jones Industrial Average (.DJI.US)$, a 128-year-old index of 30 blue-chip stocks, is price-weighted. Lower-priced stocks have less impact. The top ten weighted companies, including $UnitedHealth (UNH.US)$, $Goldman Sachs (GS.US)$, $Microsoft (MSFT.US)$, $Home Depot (HD.US)$, $Caterpillar (CAT.US)$, $Amgen (AMGN.US)$, $McDonald's (MCD.US)$, $Salesforce (CRM.US)$, $Visa (V.US)$, and $American Express (AXP.US)$, all trade above $250. Intel's Friday closing price was $23.20, the lowest among the 30 stocks, while Nvidia closed at $135.40.
Mega-cap stocks often perform well after joining the Dow. Microsoft, added in 1999, has delivered nearly 1,200% over 25 years. Apple, included in 2015, has gained over 670%. $Amazon (AMZN.US)$ joined the Dow in February, replacing $Walgreens Boots Alliance (WBA.US)$, gaining over 13% since.
Index inclusion could attract new buying in the short term, as funds tracking the Dow Jones Industrial Average will need to purchase shares of the new constituent.
In the long term, Nvidia's inclusion may not significantly impact its stock performance, as it reflects recognition of the company's past successes. The core driver of its growth remains its earnings performance and future prospects.
Data from moomoo shows 42 analysts have an average price target of $157.03 for Nvidia, with a high of $200. Nvidia will report Q3 earnings post-market on Nov. 20.
With Nvidia's addition, four of the six trillion-dollar tech firms are now in the Dow. Investors speculate $Meta Platforms (META.US)$ and $Alphabet-A (GOOGL.US)$ could join next.
Source: Bloomberg, Barron's, CNBC, Yahoo Finance, The Motley Fool
by moomoo News Olivia
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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