Intel was one of the first two tech companies to join the Dow Jones Industrial Average during the late-’90s dot-com boom, along with Microsoft. Now, a slump in Intel’s share price could cost the American chipmaker its place in the blue-chip index.
Analysts and investors said Intel was likely to be removed from the Dow, pointing to a near 60% decline in the company’s shares this year that has made it the worst performer on the index and left it with the lowest stock price on the price-weighted Dow.
The chipmaker’s shares slid about 7% on Tuesday amid a broader market selloff, with the Philadelphia SE Semiconductor index down nearly 6%, following reports of lower chip sales globally in July.
A removal from the index will hurt Intel’s already bruised reputation. The company has missed out on the artificial intelligence boom after passing on an OpenAI investment and losses are mounting at the contract manufacturing unit that the chipmaker has been building out in hopes of challenging TSMC.
To fund a turnaround, Intel suspended dividend and announced layoffs affecting 15% of its workforce during its earnings report last month. But some analysts and a former board member believe the moves might be too little, too late for the chipmaker.
“Intel being removed was likely a long time coming,” said Ryan Detrick, chief market strategist at the Carson Group.
The latest results may be the final push needed to finally see the company removed from the Dow, Detrick added.
Total semiconductor sales globally fell 11.1% in July from June and were lower than the five and 10-year averages, largely due to lower memory chip sales, UBS Securities said.
“End-market demand is not favorable for Intel, as well as the missteps on their product roadmap,” Summit Insights Group analyst Kinngai Chan said.
Intel CEO Pat Gelsinger and key executives are expected to present a plan later this month to the company’s board to slice off unnecessary businesses and revamp capital spending.
S&P Dow Jones Indices, which manages the Dow, declined to comment on whether Intel could be removed from the index.
Changes to the index are made as needed and the last update happened in February when struggling pharmacy chain Walgreens Boots Alliance was replaced by Amazon.com.
Stock price is a key element for inclusion in the Dow, unlike the S&P 500 index which takes into account market value.
The Dow’s selection committee monitors whether the highest-priced stock in the index has a price more than 10 times that of the lowest. Currently, the highest weighted stock – UnitedHealth Group – is priced about 29 times higher than Intel.
