Dow adds tech firms like Nvidia and Amazon

The Dow Jones Industrial Average has seen significant changes to its lineup over the past few years, switching out several companies for more tech-focused ones. In 2020, Salesforce, Amgen, and Honeywell International were added, replacing ExxonMobil, Pfizer, and RTX. More recently, Amazon took the place of Walgreens Boots Alliance, and Nvidia replaced Intel. This shift has made the index more growth-oriented, as many of these new companies are primarily in the technology sector. Despite the changes, some investors are questioning if these additions were wise. The tech-heavy Nasdaq Composite index is currently in a correction phase, meaning it has dropped by at least 10% from its recent high. Stocks like Nvidia, Amazon, and Salesforce are also experiencing declines. The Dow is a price-weighted index, meaning companies with higher stock prices have a greater impact on its performance. This has resulted in strong financial stocks, like Goldman Sachs and Visa, gaining larger weightings in the index. Together, five major financial companies make up nearly a quarter of the Dow, compared to the technology stocks, which hold slightly less than that combined. This growth focus could make the Dow more volatile in the future. Traditionally, the Dow has been viewed as more stable during market pullbacks, but this year, it is down even as other sectors are rising. In the past, the Nasdaq was seen as the tech-centric index, while the Dow was associated with value. However, with technology becoming a larger part of the economy, both the S&P 500 and Dow are increasingly reflecting this change. Overall, modernizing the Dow seems necessary to keep it relevant. However, investors should pay attention to how such shifts can affect its performance, particularly in line with broader market trends.