Intel's Dow Jones Status at Risk Amid Stock Decline and AI Competition

Intel could be removed from Dow Jones due to stark stock price drop: Report

Nvidia or Texas Instruments could replace Intel in the DJIA index. Intel and Microsoft were the first high-tech giants to be included in the Dow Jones Industrial Average (DJIA) index in the late 1990s. Their growth happening at the same time as that of the PC market. But times have changed. Microsoft is now the world's second largest company by market cap due to its cloud business and supremacy in the AI sector, whereas Intel is now facing possible removal from the index due to a severe drop in its stock price this year, says analysts and investors in a Reuters report. For the first time in 30 years, Intel's market capitalization has fallen below $100 billion, marking a significant drop from its peak in 2000. This year alone Intel's stock has plummeted nearly 60% and the company is now the poorest performer in the prestigious DJIA index. After the company announced a $1.6 billion loss for the second quarter its stock price dropped further to the lowest level among the index's constituents, prompting analysts to suggest that its removal is likely imminent. The company's decline is partly due to missed opportunities in the rapidly growing AI sector, declining revenue and unit share on the traditional datacenter CPU market, and massive spending on manufacturing capacity amid lack of clear business prospects on the foundry market. In an attempt to reverse its fortunes, Intel has implemented several drastic measures: the company announced layoffs impacting 15% of its workforce and suspended payments of its dividends. However, some experts believe these steps may be too little, too late. The removal of Intel from the Dow would not only impact the company's reputation but could also lead to a further decline in its stock price. Meanwhile, the Dow's selection criteria prioritize stock price over market capitalization. The highest-priced stock in the index is currently UnitedHealth Group, which is priced nearly 29 times higher than Intel, according to Reuters. If Intel is removed from the DJIA, potential replacements include Nvidia and Texas Instruments, according to an analyst cited by the Reuters report. Nvidia, which the world's third largest company by market capitalization, has seen its stock rise 160% this year alone. However, its volatility might be a concern for the Dow's selection committee. On the other hand, there is Texas Instruments known for its stable performance and significant manufacturing presence in the U.S. TI's stock price has risen over 20% this year, is more in line with the average price of current Dow components.

Which stock could replace Intel in the Dow as INTC shares slump?

Intel's (NASDAQ:INTC) recent slump could mean that the U.S. chipmaker may be replaced in the Dow Jones Industrial Average (DJI) after being a part of the blue-chip index for nearly a quarter of a century. The company and Microsoft (MSFT) were the first two tech firms to join the 127-year-old index during the dot-com era in the late 1990s. But Intel (INTC) has been struggling as its last earnings report raised concerns of its ability to turn around its business and prompted speculation that it may sell assets. Dow (DJI) inclusions are decided after evaluating stock prices and whether the company helps the index maintain desired exposure to the sector. The last company to be added was Amazon (AMZN) in February, replacing Walgreens Boots Alliance (WBA). Now the question is, which stock is well-positioned to replace Intel (INTC) in the Dow (DJI)? The crowd favorite is Nvidia (NASDAQ:NVDA), which has been leading the AI wave and whose stock more than doubled in value this year. While some believe Nvidia is too volatile for the price-weighted Dow (DJI), its recent stock split likely made it the best candidate to give the index more AI representation.

Intel's Place In Dow In Jeopardy, AI Strategy Under Scrutiny: Report - Intel (NASDAQ:INTC)

Analysts predict Intel may be removed from the Dow, citing its struggles in AI and manufacturing competitiveness. Intel Corp INTC and Microsoft Corp MSFT were among the companies that entered the Dow Jones Industrial Average during the dot-com era. Analysts and investors told Reuters Intel was likely to be removed from the Dow, pointing to the company's stock price trajectory. Intel missed out on the artificial intelligence boom as OpenAI's investment failed to materialize, and its contract manufacturing unit continued to lose out to Taiwan Semiconductor Manufacturing Co TSM. Intel plans to ship chips for over 100 million AI personal computers by 2025, with over 40 million targeted for 2024. Recent reports indicated Intel is looking to break up its product design and manufacturing businesses, including postponing some of its expansion plans. Investors can gain exposure to Intel through Vanguard Information Tech ETF VGT and SPDR Select Sector Fund - Technology XLK. Analysts snubbed Intel's dividend suspension and record layoff of close to 15,000 employees. Ryuta Makino of Gabelli Funds speculated that Nvidia Corp would replace Intel on the Dow, as per Reuters. Nvidia has been up 129% in the last 12 months as it successfully milked the A frenzy, while Intel has been down 44%. Taiwan Semiconductor is up 71%. According to Reuters, Daniel Morgan of Synovus Trust notes Texas Instruments Inc TXN as a possible Dow Jones contender. Price Action: INTC stock is down by 6.63% at $20.58 at the last check on Tuesday. Image via Shutterstock Market News and Data brought to you by Benzinga APIs

Intel shares are the Dow's worst performer this year and are the bellwether's lowest-priced stock.

Intel shares fell sharply in Tuesday trading, extending their 2024 slump, amid reports that the chipmaker could be removed from the Dow Jones Industrial Average. Intel (INTC) , which has lost more than $210 billion in market value since its prepandemic peak in January 2020, remains the benchmark's worst-performing stock and the lowest of the 30 companies on the price-weighted index. Reuters has reported that Intel shares, which have fallen more than 56% this year, are trading some 29 times lower than those of UnitedHealth (UNH) , the Dow's biggest weight. S&P Dow Jones Indices, which manages the index, usually monitors stocks that are trading at a level that is 10 times lower than the highest weighted stock. S&P Dow Jones Indices is not above turfing big-name stocks from its bellwether, having knocked out AT&T (T) for Apple in 2015, less than a year after the iPhone maker unveiled a 7-for-1 stock split in June 2014. Its last change came earlier this year, when it removed Walgreen Boots Alliance (WBA) and added tech and e-retail giant Amazon (AMZN) . Intel, the first tech name ever added to the Dow, would likely be replaced by another name in the sector, and many analysts have suggested it could be chipmaker Nvidia. Nvidia to replace Intel? Nvidia, (NVDA) which carries a market value of around $2.75 trillion and is the third biggest stock in the S&P 500, unveiled a 10-for-1 stock split in June. Some analysts suggested that the move would make the stock ripe for inclusion in the industrial bellwether. "There's no set time when they rebalance that index of 30 stocks, but seeing Nvidia's importance in the American economy and market weighting, it would make sense for them to be added to the mighty Dow 30," Jay Woods, chief global strategist at Freedom Capital Markets, had said of the Nvidia stock split at the time. Related: 5 stocks that could be tossed from the Dow Intel's woes are likely to continue regardless of its place in the Dow. The group faces huge questions about the fate of its long-running turnaround under Chief Executive Pat Gelsinger. Intel wants to scale its business across the AI spectrum by making chips that power next-generation laptops as well as those that support processors for client-based servers. Managing both has proved incredibly difficult, however, as profits have been weighed down by bloated chip inventories and its money-losing foundry division. It's also building and expanding a contract chip-foundry business tied to investments from President Joe Biden's Chips Act legislation. Intel's ongoing turnaround The group's second-quarter earnings report did little to change that perspective. Adjusted profit for the three months ended in June came in at 2 cents a share, well shy of Wall Street's 10-cent forecast, while revenues fell 1.15% to $12.8 billion. Related: Intel's future suddenly may be in doubt Looking into the current quarter, Intel sees revenue in the region of $12.5 billion to $13.5 billion, again shy of the LSEG forecast of $14.35 billion. And it unveiled plans to reduce its global headcount by 15% -- more than 15,000 people -- and suspend its quarterly dividend. Reuters also reported Tuesday that Gelsinger would detail a series of plans to the Intel board later this month, including deeper cost cuts and potential asset sales. Morgan Stanley and Goldman Sachs have been hired to advise the group, Reuters reported. The sale of its Altera chip business, which it purchased for $16.7 billion in 2015, is potentially on the table. More Tech Stocks: Intel shares were marked 7% lower in Tuesday trading and changing hands at $20.50, a move that would extend the stock's 2024 decline to around 57%. Nvidia shares were also in the red, falling 6.45% to $111.67 each. Related: Veteran fund manager sees world of pain coming for stocks