When it rains, it pours: After a sharp drop in stock price, Intel may be kicked out of the Dow Jones Industrial Average (DJIA)

During the technology bubble in 1999, Intel and Microsoft were among the first tech companies to enter the Dow Jones Industrial Average. However, due to a significant drop in stock price, Intel may now be at risk of being removed from this blue-chip stock index.

The last update to the Dow was in February, when struggling pharmacy chain Walgreens Boots Alliance was replaced by Amazon. Analysts point out that Intel's stock price has dropped nearly 60% this year, making it the worst-performing stock in the Dow. If Intel is removed from the Dow, it will further damage its already tarnished reputation and continue to impact its stock price.

Stock price is a key factor in Dow stock selection, while the S&P 500 index considers market capitalization more. The Dow Jones Stock Selection Committee monitors whether the stock with the highest price in the index is more than 10 times higher than the stock with the lowest price. Currently, the highest-weighted stock, UnitedHealth Group, has a stock price about 29 times that of Intel.

Furthermore, Intel is the least influential member in the Dow, with a closing price of $20.13 on August 29th, accounting for only 0.32% of the index.

Intel missed the wave of artificial intelligence，and has been increasing losses in its attempt to challenge TSMC's contract manufacturing business. Since its peak in August 2000, Intel's stock price has fallen by over 70%, and its market value has dropped below $100 billion.

To reverse the situation, Intel announced in last month's earnings report that it will suspend dividends and lay off more than 15% of its workforce However, some analysts and former board members believe that these measures may be too late.

Who will replace Intel?

Analyst Ryuta Makino believes that Nvidia may replace Intel in the Dow Jones. Nvidia's chips play a crucial role in generative AI, with its stock price rising over 160% this year, making it one of the most valuable companies globally. In May, Nvidia conducted a stock split, further increasing its chances of being included in the Dow Jones.

However, some investors point out that Nvidia's stock is more volatile, while the Dow Jones prefers stable stocks.

Another option is Texas Instruments, with nearly a century of history, and the company has strong production capabilities in the United States.

Daniel Morgan, Senior Portfolio Manager at Synovus Trust, stated that Texas Instruments' stock has risen by over 20% this year, currently at $214.34, close to the average price of $209 for Dow Jones components. Former Chairman of the Dow Jones Index Committee, David Blitzer, mentioned, "In cases where stocks are removed, a stock with a price close to the current list average price may be given priority consideration as a replacement."