Chip giant Nvidia will join the Dow Jones Industrial Average, the iconic Wall Street index announced Friday, underscoring the importance of artificial intelligence in the US economy.

The addition of Nvidia, which will take effect on November 8, also marks a historic moment for the semiconductor industry, as the AI chip leader replaces struggling rival Intel, which has been on the Dow index since 1999.

S&P Dow Jones Indices, the company that runs the index, also said it would add paint manufacturer Sherwin-Williams, replacing chemical giant Dow.

Shares of Nvidia have climbed over 180 per cent this year as tech giants clamour for its powerful and high-cost processors that power generative AI, the technology that is widely seen as the next phase of innovation.

Intel, one of Silicon Valley's most iconic companies, has seen its shares fall 50 percent so far this year as the company struggles to meet the AI boom.

The Dow Jones Industrial Average, created by Charles Dow in 1896, is often used as a bellwether for the state of the US stock market, the biggest in the world.

Unlike the S&P500 that weighs companies by market capitalization, the 30-stock Dow is price-weighted, meaning higher-priced stocks have more influence on its movements.

Tech companies Apple, Microsoft, IBM, Salesforce and Cisco Systems are currently in the index, while Google, Amazon and Meta are not.

The components of the DJIA are selected by a committee, and they tend to favor companies that represent a wide swathe of industries and are well-established. 

This has historically excluded many tech giants, despite their size and influence.

With their high values, including too many tech companies would also drown out the influence of the other sectors represented in the index. 

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