Market Shakeup: Intel’s Dow Demotion Sparks Concern
A Surprising Ouster
Intel’s (NASDAQ: INTC) stock price surged on Friday after the company reported its third-quarter results, which, although disappointing, hinted at a brighter outlook for the fourth quarter. However, the celebration was short-lived, as S&P Global announced that rival Nvidia would replace Intel in the Dow Jones Industrial Average (DJINDICES: ^DJI) after hours.
A New Era for the Dow
The move, set to take effect on November 8, marks the end of Intel’s 25-year run as a Dow component. The decision is aimed at providing a more representative exposure to the semiconductor industry, given Nvidia’s significantly higher share price. This change will also see chemical company Dow swapped out for Sherwin-Williams.
What It Means for Intel
While being dropped from the Dow doesn’t have the same impact as removal from the S&P 500, it’s still a blow to Intel’s reputation. The company’s shares fell 1.8% in after-hours trading, adding to concerns about its ongoing turnaround efforts.
A Look Back at Past Components
S&P Global’s decision to update the Dow Jones Industrial Average is rare, but it’s worth examining how past components have fared after being removed. Walgreens Boots Alliance, which was replaced by Amazon in February, has struggled since then, with its stock price plummeting 55%. On the other hand, ExxonMobil, Pfizer, and RTX, which were removed in 2020, have outperformed the broad-market index.
What’s Next for Intel?
Intel’s future hinges on its ability to execute its turnaround strategy, including cost-cutting initiatives, its upcoming 18A foundry process, and its artificial intelligence chips designed to keep up with Nvidia. If the company can make a comeback, it will likely start with these key initiatives.
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