Nvidia Takes Intel's Spot in Dow Index After 25 Years

Intel is set to exit the Dow Jones Industrial Average after a notable 25-year presence, making way for Nvidia, according to an announcement from S&P Dow Jones Indices. This change marks another setback for Intel, a company that was one of the first two technology firms to join the prestigious blue-chip index.

Previously a leader in chip manufacturing, Intel has recently lost its competitive edge to rivals like TSMC. The company has also missed out on significant growth within the generative artificial intelligence sector, primarily due to decisions like declining to invest in OpenAI, the parent company of ChatGPT.

In 2023, Intel's stock has plummeted by 54%, making it the worst performer on the Dow and leaving it with the lowest stock price among the index's constituents. Recently, Intel's stock dipped slightly to $22.79, while Nvidia shares climbed over 2%, reaching $139.17.

Just a day before this news, Intel expressed a cautious optimism regarding its PC and server divisions. The company projected its revenue for the current quarter to be above analysts' estimates but acknowledged it still faces substantial challenges ahead.

According to analyst Susannah Streeter, "Losing the status of Dow Jones inclusion would be another reputational blow for Intel, as it grapples with a painful transformation and loss of confidence." She added that absence from the Dow could also affect Intel's share price since many exchange-traded funds (ETFs) track the index.

Founded in 1968, Intel made its mark initially by selling memory chips before shifting focus to processors that played an essential role in the rise of personal computers. The brand became iconic in the 1990s with its “Intel Inside” campaign, which helped turn standard electronic components into coveted products seen in laptops everywhere.

Intel's revenue has dropped to $54 billion in 2023, down nearly one-third from 2021 when Pat Gelsinger took over as CEO. This year, the company is on track to report its first annual net loss since 1986, and its market value has fallen below $100 billion for the first time in 30 years.

In stark contrast, Nvidia is now valued at $3.32 trillion, making it the second-most valuable company globally. The company's rapid ascent is largely attributable to its role in developing the chips that are fundamental for powering generative AI technologies, which have driven a remarkable seven-fold increase in its shares over the last two years. Nvidia's stock has more than doubled just this year.

What was once perceived as a gaming-focused company, Nvidia is now a critical player in the AI sector and is viewed as a key indicator of the AI market's health. A recent 10-for-one stock split has enhanced the availability of Nvidia shares to retail investors, facilitating its inclusion in the Dow.

On the other hand, Intel has been struggling to gain a foothold in the AI chip market heavily dominated by Nvidia. The latter's chips are not only challenging to obtain but also difficult to replace in AI data centers, thanks to Nvidia's technological advantages and high replacement costs.

Nvidia, Intel, Dow, Stocks, Semiconductors