Dow Jones Industrial Average Set for Historic Shake-Up: Verizon Out, Alphabet In on June 29
The Dow Jones Industrial Average, which marked its 130th anniversary last month, is preparing for another pivotal change. Since its debut on May 26, 1896, the index has undergone more than 50 adjustments. What once started as a 12-stock industrial-focused benchmark now consists of 30 diverse multinational corporations.
When trading opens on June 29, telecom giant Verizon Communications will be removed, and Alphabet — the parent company of Google and a virtual monopoly in internet search — will join the Dow. Specifically, Alphabet's Class A shares (GOOGL) will take the spot.
Unlike the cap-weighted S&P 500 and the Nasdaq Composite, the Dow is price-weighted. That means a stock's influence depends on its share price, not its market value. For example, even though Nvidia is the world's most valuable publicly traded company with a market cap near $4.85 trillion, its $200 share price only makes it the 19th most impactful component in the Dow.
Verizon's exit boils down to two clear problems. First, its share price of about $46.73 (as of June 23) was the second-lowest in the index. Based on the current Dow divisor, that gave Verizon a weight of roughly 287.7 points — a tiny fraction of the index's closing level around 51,667. Second, the committee behind the Dow prefers companies that reflect the broader U.S. economy and demonstrate long-term winning streaks.
Since Verizon joined the Dow on April 8, 2004, its shares have gained just 39.5% excluding dividends. That performance lagged the index significantly, making it a drag that will soon be eliminated.
This isn't a surprise to those who follow the index closely. I called for Verizon's removal and Alphabet's addition back in January. Starting Monday, Alphabet will join other trillion-dollar peers like Nvidia, Microsoft, and Amazon in the iconic Dow.
Alphabet brings a rare mix of technology and communications. Google commands roughly 90% of global internet search traffic, according to GlobalStats, giving Alphabet extraordinary advertising pricing power and tying its fortunes tightly to the U.S. economy. It also owns YouTube, the second-most-visited social platform worldwide, right behind Google itself.
But the real long-term story for Alphabet lies in artificial intelligence. By embedding generative AI and large language models into Google Cloud, its high-margin cloud infrastructure business has seen a sharp reacceleration in revenue growth. That positions Alphabet as a leader in AI applications, a theme that is reshaping the entire market.
The numbers also solve the problems that plagued Verizon. At $346.13 per share, Alphabet's Class A stock will become the sixth most influential component in the Dow. Since its IPO in August 2004 — just a few months after Verizon entered the index — Alphabet shares have surged roughly 13,700%.
On Monday, June 29, the Dow Jones Industrial Average will indeed change forever, as Alphabet finally claims a place it has long deserved in this enduring benchmark.
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Sean Williams has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
The Dow Jones Industrial Average Will Change Forever on June 29, With Verizon Getting the Boot and a Virtual Monopoly Joining the Index was originally published by The Motley Fool