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.
