Intel ‘May Be Removed’ From Dow Index

Matthew Broersma,
Linkedin
Intel chief executive Pat Gelsinger. Image Credit: Intel

Intel likely to be removed from Dow Jones Industrial Average amidst ongoing turnaround challenges, report finds, as stock takes another hit

Intel’s stock price dropped sharply in Tuesday trading following reports that it is likely to be removed from the Dow Jones Industrial Average in the coming months.

The troubled company, which has lost more than $210 billion (£160bn) since its prepandemic high in January 2020, has a share price more than 70 percent lower than its record high in August 2000, not long after it joined the Dow in late 1999.

With a nearly 60 percent price decline this year alone, Intel is the worst performer on the index and has the lowest stock price in the price-weighted Dow, Reuters reported.

Stock price is a key element for inclusion in the Dow, unlike the S&P 500 index, which takes into account market value, the report noted.

Intel manufacturing worker displays test system-on-chip built on a glass substrate. Image credit: Intel
Intel manufacturing worker displays test system-on-chip built on a glass substrate. Image credit: Intel

Dow doubt

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, and currently the highest-priced stock, UnitedHealth Group, is priced about 29 times higher than Intel, the report said.

Changes are made as needed, with the most recent swap in February removing pharmacy chain Walgreens Boots Alliance and adding Amazon.com.

Intel’s disastrous financial results reported in August could be the final push that removes Intel from the Dow, an analyst told Reuters.

The company said at the time it would suspend its dividend and cut 15 percent of its staff to help fund turnaround plans.

AI darling Nvidia is a possible pick to replace Intel, but its stock price may be too volatile for the Dow committee, which may instead choose a firm such as Texas Instruments, whose price is closer to the average of the other included companies, Reuters’ report said.

Intel’s stock price decline on Tuesday came amidst a broader market selloff, with the Philadelphia SE Semiconductor index down more than 7 percent following reports of a decline in worldwide chip sales in July.

Chip sales slump

Total semiconductor sales worldwide fell 11.1 percent in July from June, largely due to a slump in memory chip sales, UBS Securities said, casting further doubts on Intel’s sales prospects.

Chief executive Pat Gelsinger and other executives are planning to pitch turnaround options to the board of directors in mid-September, which could include selling off business units and further cuts to capital spending, reports have said.

Microsoft and Intel were the first two Nasdaq-listed tech companies to join the Dow in the midst of the late-90s dot-com boom.

Microsoft, which joined the Dow at the same time as Intel, is currently the second most-valuable US-listed company after Apple, boosted by its heavy investments into OpenAI.