Intel’s Dow status under threat as struggling chipmaker’s shares plunge

Intel’s Dow Jones Status in Jeopardy

Intel, one of the two tech giants that joined the Dow Jones Industrial Average during the dot-com boom, is facing the prospect of being removed from the blue-chip index due to its struggling share price. Analysts and investors have highlighted Intel’s nearly 60% decline this year, making it the index’s worst performer and granting it the lowest stock price on the price-weighted Dow.

Intel’s Reputation and Financial Struggles

The potential removal from the Dow would further damage Intel’s already bruised reputation. The company has missed out on the artificial intelligence boom, has faced mounting losses in its contract manufacturing unit, and has suspended dividend payments and announced layoffs to fund a turnaround. However, some experts believe these measures may be insufficient for the beleaguered chipmaker.

Inclusion Criteria for the Dow Jones Industrial Average

Unlike the S&P 500 index, which considers market value, the Dow Jones Industrial Average primarily weighs stock price. The Dow’s selection committee ensures that the highest-priced stock in the index does not exceed ten times the price of the lowest-priced stock. Currently, Intel is the least influential member of the index, with a meager 0.32% weightage and a stock price significantly lower than other constituents.

Consequences of Removal and Potential Replacements

An exclusion from the Dow would further hurt Intel’s share price, which has already plummeted over 70% since its peak in 2000, resulting in a market value below $100 billion for the first time in three decades. Several potential candidates could replace Intel in the index, including Nvidia, a semiconductor company whose shares have soared this year, and Texas Instruments, a more stable chipmaker with significant domestic production capacity.

Decision-Making Process and Considerations

S&P Dow Jones Indices, the manager of the Dow, has not commented on Intel’s potential removal. Changes to the index are made as needed, with the last update occurring in February. In the event of a removal, the selection committee is expected to prioritize stocks with prices closer to the average of the current constituents, maximizing the index’s price diversity.