By Arsheeya Bajwa
(Reuters) -Intel (INTC) will be replaced by Nvidia (NVDA) on the blue-chip Dow Jones Industrial Average index after a 25-year run, underscoring the shift in the chip manufacturing market and marking another setback for the struggling semiconductor company.
Nvidia will join the index next week along with paint maker Sherwin-Williams, which will replace Dow, S&P Dow Jones Indices said Friday.
Once the dominant force in chip manufacturing, Intel has ceded its manufacturing lead to rival TSMC in recent years and missed out on the generative artificial intelligence boom after missteps including passing on an investment in ChatGPT owner OpenAI.
Shares of Intel are down 54% this year, making the company the worst performing index and with the lowest share price on the price-weighted Dow Jones.
Shares of Intel fell 1.6% in extended trading on Friday, while those of Nvidia rose 2.2%.
The development comes a day after Intel expressed optimism about the future of its PC and server businesses, with revenue for the current quarter coming in above estimates, but warned it had “a lot of work to do.”
“Losing Dow Jones status would be another reputational blow for Intel as it struggles with a painful transformation and loss of confidence,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“It would also mean that Intel is not included in exchange-traded funds (ETFs) that track the index, which could further impact its share price.”
Launched in 1968, the Silicon Valley pioneer sold memory chips before moving into processors that helped launch the PC industry.
In the 1990s, “Intel Inside” stickers turned ordinary electronic components into premium products, eventually becoming ubiquitous on laptops.
Intel’s revenue was $54 billion in 2023, down nearly a third from 2021, when Pat Gelsinger took over as CEO. Analysts expect Intel to report its first annual net loss since 1986 this year.
The company is worth less than $100 billion for the first time in thirty years.
That pales in comparison to Nvidia, which sits at a valuation of $3.32 trillion, making it the second most valuable company in the world.
NVIDIA’S AI LEAD
Nvidia has become a cornerstone of the global semiconductor industry thanks to the vital role its chips play in powering generative AI technologies, leading to a sevenfold rise in its shares over the past two years.
This year alone, the company’s shares have more than doubled.
Once popular only among gamers hunting for PCs with Nvidia’s graphics processors, it is now seen as a barometer for the AI market.
The company’s 10-for-1 stock split, which took effect in June, also helped pave the way for its addition to the index, making its surging stocks more accessible to retail traders.
Intel, on the other hand, has struggled to gain market share in the AI chip market dominated by Nvidia, with the leader’s chips difficult to source and even harder to replace in AI data centers due to the technological edge of its processors and high costs. of replacing it.
(Reporting by Akash Sriram, Arsheeya Bajwa, Deborah Sophia and Sourasis Bose in Bengaluru; Editing by Maju Samuel)
