Nvidia co-founder and CEO Jensen Huang speaks at an event in Taipei, Taiwan, June 2, 2024.
Annabelle Chronicle | Bloomberg | Getty Images
NVIDIA Joining the legend Dow Jones Industrial Average. us learned The chipmaker will be added to the blue-chip index on Friday, ending months of speculation that began in May after Nvidia split its stock 10-for-1.
What impact will it have NVIDIA What are the 30 stocks added to the index before the market opens this Friday?
Nvidia has become one of the world’s largest companies over the past two years as artificial intelligence has become a dominant theme in boardrooms. Even beyond Microsoft market capitalization and is working with apple Become the largest stock in both markets S&P 500 Index and high-tech Nasdaq 100 Index.
NVIDIA, 1 year
Please remember, Dow Chemical is a price-weighted index, so a company’s market capitalization is not important to its impact on the index. Instead, stock prices determine how much of an impact a single stock can have on the Dow on a daily basis. therefore UnitedHealthA closing price above $567 per share typically has the greatest impact on the index. Goldman SachsCompanies with shares above $500 also often rank among the top gainers.
As of Friday’s close, Nvidia will be the 21st most expensive stock in the Dow, while Intel, which will be removed from the index, is the cheapest at just over $23.
A $1 rise in UnitedHealth represents only a 0.18% change in the stock’s stock price, while Intel’s stock price jumped 4.31%. For Nvidia, a $1 change is approximately 0.74%. Despite these percentage differences, the impact on the Dow remains the same. A $1 change in any Dow stock adds about 6.6 points to the index.
But it’s not just the share price that matters. Volatility is also a key factor. By considering share price and historical volatility, we can estimate each stock’s potential impact on the index. Based on its share price and recent volatility, Nvidia will be the eighth most influential company on the Dow Jones, according to a CNBC analysis of FactSet data.
Our analysis shows that with UnitedHealth’s high share price, it is expected to have the largest daily moves in the Dow, at around $8.40 per day. Coca ColaOn the other hand, it typically moves just $0.50 per day, reflecting its lower share price and stable performance. Nvidia is expected to move around $4.40 daily, between Amgen and American Expressits per-share price is more than twice that of Nvidia. Nvidia’s volatility makes up for its relatively tame stock price.
This all highlights some of the limitations of price-weighted indexes: Nvidia is a key player in today’s market, but it likely wouldn’t be included in the Dow Jones until its stock split earlier this year. While price per share once held significance, fractional trading and ETFs have made that significance largely obsolete. Only in options trades, where contracts tend to be for 100 shares, does the price per share really matter – both in options trades and in the Dow Jones Industrial Average.
