Chip giant Nvidia will join the Dow Jones Industrial Average, the Wall Street index announced on 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 a Dow constituent 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 percent 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. (AFP)