S&P Dow Jones Indices announced on Tuesday that Alphabet will replace Verizon Communications in the Dow Jones Industrial Average.
The change will take effect on June 29 and will increase the blue-chip index’s exposure to technology, artificial intelligence and digital services.
Alphabet Shares Rise After Dow Jones Announcement
Alphabet shares gained approximately 0.3% in premarket trading on Wednesday following the announcement.
Meanwhile, Verizon shares declined around 0.55% as investors reacted to the company’s removal from the index.
Dow Jones Industrial Average Prepares for Latest Change
The Dow Jones Industrial Average was introduced in May 1896, making it one of the oldest and most closely followed stock market indexes in the United States.
The index includes 30 leading American companies from several major industries.
This will be the first change to the Dow since November 2024. At that time, Nvidia and Sherwin-Williams replaced Intel and Dow Inc., respectively.
Why Verizon Is Leaving the Dow Jones
S&P Dow Jones Indices explained that Verizon represented only about 0.5% of the Dow Jones Industrial Average.
Unlike market-capitalization-weighted indexes, the Dow is weighted according to the share prices of its members.
As a result, companies with persistently lower stock prices have a smaller influence on the index’s overall performance. Verizon’s relatively low share price therefore limited its impact on the Dow.
Alphabet Expands the Dow’s Technology Exposure
S&P Dow Jones Indices highlighted Alphabet’s broad portfolio of technology and digital businesses.
The company operates across online advertising, cloud infrastructure, artificial intelligence, consumer hardware, autonomous transportation, healthcare technology and media distribution.
The index provider said adding Alphabet would improve the Dow’s exposure to several fast-growing areas of the U.S. economy.
Alphabet’s larger share price, market value and diversified business model also make it a more representative communications services company for the index.
Alphabet’s Market Value Far Exceeds Verizon
Alphabet’s market capitalization recently stood at approximately $4.22 trillion, according to CompaniesMarketcap.com.
That figure significantly exceeds Verizon’s estimated market value of around $195.12 billion.
However, market capitalization does not directly determine a company’s influence within the Dow because the index uses a price-weighted methodology.
Honeywell to Remain in the Dow After Spin-Off
S&P Dow Jones Indices also clarified how Honeywell’s planned restructuring will affect its index membership.
Following the spin-off of Honeywell Aerospace, the parent company will remain in the Dow Jones Industrial Average under the new name Honeywell Technologies.
Honeywell Aerospace will not be added to the index as a separate member.
