Finance Liaision Society, Nov 2nd (Editor Zhao Hao) After the U.S. stock market closed on Friday, November 1st, S&P Dow Jones Indices announced changes to the components of the Dow Jones Industrial Average:

Nvidia will replace Intel, Sherwin-Williams will replace Dow Inc in the Dow Jones Industrial Average, also known as the 'Dow,' one of the three major U.S. indices, effective before next Friday's opening on November 8th.

Following the announcement, Nvidia and Sherwin-Williams both saw their stock prices rise over 3% in after-hours trading, while Intel dropped nearly 2% and Dow Inc fell over 0.6%.

The press release explained that this index adjustment aims to ensure higher representativeness for the semiconductor and materials industries. Media analysis suggests that Nvidia's inclusion represents a major 'big reshuffle' for this blue-chip index, reflecting the significant transformation in artificial intelligence and the semiconductor industry.

As the 'shovel seller' of AI computing power, Nvidia's value has made significant leaps in the past two years, with the stock surging 239% last year, and climbing over 173% this year on top of that. Currently, Nvidia's market cap has reached $3.3 trillion, second only to Apple among global publicly traded companies.

With Nvidia's inclusion, four out of the six 'Trillion Dollar Market Cap Club' companies in the U.S. stock market are now part of the Dow's components, with only Alphabet and Meta Platforms not included, while Amazon joined back in February of this year.

In May this year, Nvidia announced a stock split in a ratio of 1 to 10, reducing the stock price per share from over $1000 to slightly above $100. Analysts speculated at that time that this move might be to prepare for inclusion in the Dow Jones Industrial Average.

Unlike the s&p 500 index, which is 'market cap-weighted', the Dow Jones uses 'price-weighted', meaning that the price changes of high-priced stocks have a greater impact on the index level than the price changes of low-priced stocks. This mechanism makes it difficult for stocks with very high prices to be included in the Dow Jones.

Benefiting from other technology companies' purchases of H100 and other graphics processors (GPUs), Nvidia's performance announced in August shows quarterly revenue exceeding $30 billion, a 122% year-on-year increase; net income of $16.599 billion, an increase of 168%.

Last month, Nvidia CEO Jensen Huang stated that the demand for the company's next-generation artificial intelligence chip, Blackwell, is 'crazy', 'everyone wants to own the most products, everyone wants to be the first to receive them.'

Meanwhile, Intel's stock price has been 'plunging', down more than 53% year-to-date. As a former leading global chip manufacturer, Intel has been in a decline in recent years, and the decline is set to accelerate in 2024.

Earlier this week, Intel's CEO Pat Gelsinger stated in an earnings conference call that the company is undergoing one of the most groundbreaking reorganizations since its establishment in 1968.

In the previous quarter, Intel announced layoffs, expense reductions, and a suspension of dividends to investors. It is worth mentioning that Intel was added to the Dow Jones component stocks in 1999, along with Microsoft.