Fintech Zoom Business
Chip giant Nvidia is the ninth-most valuable company in the S&P 500. With a market capitalization of almost $500 billion, the company is now worth nearly as much as semiconductor rivals Intel, Advanced Micro Devices and Qualcomm — combined. Could Nvidia soon wind up listed on the venerable Dow, too?
There’s a strong case to be made for Nvidia
To be sure, the chip maker’s annual sales still pale in comparison to Intel or IBM, which are both expected to generate more than $70 billion in revenue this year. But Nvidia’s revenue forecast of about $25 billion for this fiscal year isn’t too shabby.
(V) and McDonald’s
(CRM), which was added to the Dow last year.
Adding Nvidia could give the Dow more exposure to the lucrative industries of gaming and cryptocurrencies, as Nvidia’s graphics processing chips are a big part of high-end PCs used by gamers as well as for bitcoin mining rigs.
There’s another big reason why there’s been more chatter lately about Nvidia potentially joining the Dow. (Investing sites Fintech Zoom and Seeking Alpha have both speculated about the possibility.)
Nvidia, until recently, would have been too expensive for the Dow, which weights the 30 companies it lists by stock price.
(UNH), with a stock price of around $415, is the current top stock in the Dow, accounting for about 8% of the average.
But Nvidia recently split its stock, which cut its share price by a quarter. Stocks now trade for around $190. There are a dozen Dow components that have a stock price higher than that.
(AAPL) split its stock to a more Dow-friendly level before it was added to the blue chip average in 2015.
And the fact that tech titans Amazon
(AMZN) and Google owner Alphabet
(GOOGL), which each have shares prices in the quadruple digits, have not split their stock recently is arguably the main reason why neither company is in the Dow — despite having market valuations approaching $2 trillion.
(FB) is another possible future Dow addition, too, given that it is now worth more than $1 trillion.
The social media giant might need to split its stock as well though. At a price of nearly $375, Facebook would be the third-largest Dow component if added at current levels, trailing only UnitedHealth and Goldman Sachs
Nvidia could also be an attractive option if the company’s planned purchase of UK-based mobile chip designer Arm from SoftBank goes through. The $40 billion purchase would make Nvidia an even bigger player in the world of tech.
There are questions about whether that deal will pass regulatory muster, as it is being scrutinized by several agencies around the globe. There has even been speculation that Arm might pursue an initial public offering instead.
Nvidia was not available for comment. A spokesperson for Arm told Fintech Zoom Business that the company’s CEO, Simon Segars, has stated to The Telegraph that there are no plans for an IPO and that the company is focused on closing the Nvidia deal.
A spokeswoman for S&P Dow Jones Indices, which has a committee in charge of making changes to the firms listed on the Dow, had no comment about the possible inclusion of Nvidia or any other changes to the index.
(HON) were also added while Exxon Mobil
(PFE) and Raytheon
(RTN) were given the boot.