Dow to Add Alphabet, Remove Verizon in Index Composition Shift

The Dow Jones Industrial Average is set to add Alphabet and remove Verizon in an index composition change. Mark Malek, chief investment officer at Siebert, described the move as a recognition of Alphabet's transformation into an AI infrastructure company, writing in a note Thursday that the inclusion represents a blue-chip endorsement of that shift. The change reflects AI's increasing prominence in both the stock market and the broader economy, with the Dow's methodology highlighting companies that define current industrial leadership.

Analyst Describes Alphabet as AI Infrastructure Company

Mark Malek characterized Alphabet's business model in his Thursday note, stating that "Alphabet isn't a search company that does AI on the side. It is an AI infrastructure company that happens to still dominate search." He wrote that "the Dow's decision to include it is, intentionally or not, a blue-chip endorsement of that transformation." The assessment positions Alphabet as a dominant AI player whose inclusion symbolizes AI's pervasiveness in the stock market and economy.

Dow Weighs Stocks by Price Rather Than Market Capitalization

The Dow Jones Industrial Average weighs stocks based on price instead of market capitalization, a methodology that differs from the S&P 500 and Nasdaq. Under this system, a company with an expensive stock receives more weight than a company with a larger market cap. Goldman Sachs, with a stock price above $1,000 and a market cap around $300 billion, carries more weight in the index than Apple, which has a stock price around $280 but a market cap exceeding $4 trillion.

Index Established in 1896 with 12 Industrial Companies

The Dow Jones Industrial Average was established in 1896 to track major companies of that era. The original index included 12 businesses dealing in physical goods: American Sugar, American Tobacco, Chicago Gas, Tennessee Coal and Iron, and U.S. Leather. Malek described these companies as "the commanding heights of the American economy — the companies that fed factories, clothed workers, and powered the furnaces of industrial expansion."

FAQ

What change is the Dow Jones Industrial Average making to its composition? The Dow is set to add Alphabet and remove Verizon from the index.

How does the Dow weight stocks differently from other major indexes? The Dow weighs stocks based on price rather than market capitalization, meaning a company with a higher stock price receives more weight regardless of its total market value. This differs from the S&P 500 and Nasdaq, which weight by market cap.

When was the Dow Jones Industrial Average established? The index was established in 1896 with 12 companies that dealt in physical goods, including American Sugar, American Tobacco, Chicago Gas, Tennessee Coal and Iron, and U.S. Leather.