Nvidia Replaces Intel in Dow Jones After 25 Years

Nvidia will replace Intel in the Dow Jones Industrial Average, marking the end of Intel's 25-year presence in the prestigious index. This change, announced by S&P Dow Jones Indices, underscores the challenges that Intel has faced in recent years as it has struggled to keep pace with its competitors.

Once a leader in chip manufacturing, Intel has lost its manufacturing advantage to rivals like TSMC. The company has also missed significant opportunities in the rapidly growing field of generative artificial intelligence. Notably, Intel did not invest in OpenAI, the creator of ChatGPT, which has been a major player in the AI market.

In 2023, Intel's shares plummeted by 54%, making it the worst performer on the Dow index. This decline has resulted in its stock price dropping to the lowest level among components of the price-weighted index.

On Friday, Intel's stock fell by about 1% to $22.79 in after-hours trading, while Nvidia's shares increased by over 2% to reach $139.17 per share.

This transition in the index occurred shortly after Intel shared an optimistic outlook regarding its PC and server businesses, projecting revenue for the current quarter that surpassed expectations. However, the company did caution that it still has considerable work ahead of it.

According to financial analysts, losing its place in the Dow could further harm Intel's reputation as it undertakes a difficult transformation while facing eroding investor confidence. Moreover, not being included in exchange-traded funds (ETFs) that track the Dow could further pressure its stock price.

Founded in 1968, Intel originally sold memory chips before shifting its focus to processors, which played a crucial role in the birth of the personal computer industry. In the 1990s, the company became synonymous with PC computing, thanks to its famous "Intel Inside" marketing campaign that positioned Intel chips as premium components.

However, Intel is now reporting revenues of $54 billion in 2023, a decline of nearly one-third from 2021, when Pat Gelsinger became CEO. Analysts predict that Intel will record its first annual net loss since 1986 this year, and the company's market cap has dropped below $100 billion for the first time in three decades.

In stark contrast, Nvidia's market valuation has soared, reaching $3.32 trillion, making it the world's second-most valuable company. Nvidia has become a key player in the semiconductor industry, providing essential chips that drive generative AI technologies. Over the last two years, Nvidia's stock has increased seven-fold, with a remarkable rise of more than two times this year alone.

What was once a company mostly favored by gamers has transformed into a major bellwether for the AI market. In June, Nvidia executed a 10-for-one stock split, which made its rapidly climbing shares more accessible to individual investors, further solidifying its status in the market.

As Nvidia continues to lead in the AI chip sector, Intel struggles to compete, falling behind as the demand for NVIDIA's advanced processors remains high and difficult to replace, owing to their superior technology and replacement costs.

Nvidia, Intel, Dow