Intel, a pioneering tech company that joined the Dow Jones Industrial Average alongside Microsoft during the late-'90s dot-com boom, is now at risk of being removed from the prestigious index. The potential downgrade comes in the wake of a dramatic nearly 60% drop in Intel's share price this year, which has made it the worst performer on the Dow and resulted in the lowest stock price on the price-weighted index.
Analysts and investors have raised concerns that Intel's declining performance could lead to its removal from the Dow. The company's stock woes are compounded by missed opportunities in the artificial intelligence sector, notably its decision to pass on investing in OpenAI, and mounting losses from its contract manufacturing unit, which was intended to challenge industry leader TSMC.
In an effort to address its financial challenges, Intel suspended its dividend and announced significant layoffs affecting 15% of its workforce in its most recent earnings report. However, some experts, including former board members, question whether these measures will be sufficient to reverse the company's fortunes.
Ryan Detrick, Chief Market Strategist at the Carson Group, commented on the situation, saying, "Intel being removed was likely a long time coming." He added that the company's latest results may provide the final impetus for its exclusion from the Dow.
S&P Dow Jones Indices, which oversees the Dow, has not commented on the potential removal of Intel from the index. Changes to the Dow are made as necessary, with the last update occurring in February when Walgreens Boots Alliance was replaced by Amazon.com.
Unlike the S&P 500, which considers market capitalization for index inclusion, the Dow relies heavily on stock price. Currently, the highest-priced stock in the Dow, UnitedHealth Group, is priced approximately 29 times higher than Intel. The chipmaker's weight on the Dow is minimal, at just 0.32%, based on its closing price of $20.13 on August 29.
The potential removal from the Dow would further impact Intel's already strained reputation and could drive its shares lower. The company, which reached a record high in August 2000, has seen its market value fall below $100 billion for the first time in three decades, with shares down more than 70% from their peak.
