Intel shares fell sharply in trading on Tuesday, extending their 2024 slide, amid reports the chipmaker could be removed from the Dow Jones Industrial Average.
Intel (INTC) which has lost more than $210 billion in market value since its pre-pandemic peak in January 2020, remains the worst-performing stock in the benchmark index and the lowest of the 30 companies in the price-weighted index.
Reuters has reported that Intel shares, which have fallen more than 56% this year, are trading about 29 times lower than those of UnitedHealth. (UNH) the largest weighting of the Dow.
S&P Dow Jones Indices, which manages the index, typically tracks stocks that trade at 10 times the value of the largest-weighted stock.
S&P Dow Jones Indices has no qualms about kicking big-name stocks out of its benchmark, after removing AT&T (I) for Apple in 2015, less than a year after the iPhone maker revealed a 7-for-1 stock split in June 2014.
Its latest change came earlier this year, when it eliminated Walgreen Boots Alliance. (AMB) and added the technology and e-commerce giant amazon (amazon.com) .
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Intel, the first tech name added to the Dow, would likely be replaced by another name in the sector, and many analysts have suggested it could be chipmaker Nvidia.
Will Nvidia replace Intel?
Nvidia, (NVDA) The company, which has a market value of about $2.75 trillion and is the third-largest stock in the S&P 500, announced a 10-for-1 stock split in June. Some analysts suggested the move would make the stock ideal for inclusion in the industrial index.
“There's no set point in time when they would rebalance that 30-stock index, but given the importance of Nvidia to the U.S. economy and its market weighting, it would make sense for them to be added to the mighty Dow 30,” Jay Woods, chief global strategist at Freedom Capital Markets, had said of Nvidia's stock split at the time.
Related: 5 stocks That Could Be Kicked Out of the Dow
Intel's troubles are likely to continue, regardless of its position in the Dow. The group faces huge questions about the fate of its long-running recovery under Chief Executive Pat Gelsinger.
Intel wants to expand its business across the ai spectrum by making chips that power next-generation laptops as well as those that support processors for client-based servers.
However, managing both has proven incredibly difficult, with profits hit by bloated chip inventories and its money-losing foundry division.
It is also building and expanding a contract chip foundry business tied to investments from President Joe Biden's Chips Act legislation.
Intel's ongoing recovery
The group's second-quarter earnings report did little to change that outlook. Adjusted profit for the three months ending in June was 2 cents per share, well below the 10 cents expected by Wall Street, while revenue fell 1.15% to $12.8 billion.
Related: Intel's future may suddenly be in doubt
For the current quarter, Intel expects revenue of $12.5 billion to $13.5 billion, which also falls short of LSEG's forecast of $14.35 billion. Intel has also announced plans to reduce its global workforce by 15% (more than 15,000 people) and suspend its quarterly dividend.
Reuters also reported on Tuesday that Gelsinger would detail a range of plans to Intel's board later this month, including deeper cost cuts and possible asset sales.
According to Reuters, Morgan Stanley and Goldman Sachs have been hired to advise the group. The sale of its Altera chip business, which it bought for $16.7 billion in 2015, is potentially on the table.
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Intel shares fell 7% in trading on Tuesday and were trading at $20.50, a move that would extend the stock's decline into 2024 to about 57%.
Nvidia shares were also in the red, falling 6.45% to $111.67 each.
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