In a recent strategic move that reverberated across the stock market, NVIDIA Corporation (NASDAQ: NVDA) announced a ten-for-one stock split, slated to take effect on June 7th. This significant decision was aimed at enhancing accessibility to NVIDIA’s stock, essentially making it more affordable for investors. With this stock split, shareholders will receive ten shares for every one they currently hold as of the record date on June 6th. Subsequently, trading for NVIDIA’s stock will commence at a split-adjusted price on June 10th.
This announcement has stirred speculation within the financial community regarding NVIDIA’s potential inclusion in the prestigious Dow Jones Industrial Average (DJIA), with the possibility of replacing Intel Corporation (NASDAQ: INTC). The DJIA, renowned as a price-weighted index, tends to favor stocks with lower prices to prevent any single stock from exerting disproportionate influence on the index. Presently, NVIDIA’s stock price exceeds $1000 per share, presenting a formidable barrier to its inclusion in the index. However, with the impending stock split, NVIDIA’s stock price is expected to decrease to approximately $100 per share, rendering it a more viable contender for DJIA membership.
The DJIA has historically undergone revisions infrequently, with the most recent adjustment occurring in August 2020. During this revision, Salesforce (NYSE: CRM), Honeywell (NASDAQ: HON), and Amgen (NASDAQ: AMGN) replaced ExxonMobil (NYSE: XOM), Raytheon (NYSE: RTN), and Pfizer (NYSE: PFE). While S&P Dow Jones Indices, the entity responsible for managing the index, refrains from commenting on speculative additions or deletions, a careful analysis of the DJIA methodology suggests that NVIDIA’s inclusion might be forthcoming.
The DJIA methodology places emphasis on several key factors when considering potential additions to the index. These factors include a company’s reputation, sustained growth trajectory, and level of interest among investors. Additionally, the index committee evaluates stock prices, ensuring that the highest-priced stock does not exceed ten times the value of the lowest-priced stock within the index. NVIDIA’s standing as a frontrunner in the field of artificial intelligence (AI) technology, coupled with its substantial market value and projected revenue growth, positions it favorably for inclusion in the DJIA.
If NVIDIA were to replace Intel in the DJIA, it would not only underscore NVIDIA’s dominance in the AI sector but also signify the growing importance of AI across various industries. With NVIDIA’s projected revenue growth far outpacing that of Intel, such a move would serve as a clear indication of the increasing significance of AI in shaping future industry developments and technological advancements.