Intel stock is down more than 60% in the past five years
NVIDIA (NASDAQ:NVDA) stock rose and Intel (NASDAQ:INTC) shares fell Monday morning as artificial AI processor manufacturer NVIDIA is set to replace chipmaker Intel in the Dow Jones Industrial Average (DJIA) on Friday.
The replacement is indicative of NVIDIA’s fortunes since the “AI gold rush” of the 2020s, with the firm’s stock up more than 2,500% in the past five years. Meanwhile Intel has shed more than 60% of its value in the same period.
For Intel, the switch is a sign of the firm’s ongoing struggle to regain its footing after losing market share to Advanced Micro Devices (NASDAQ:AMD) and other chipmakers.
Another feather in NVIDIA’s cap
NVIDIA has already been on a winning streak in recent years, but the addition to the 30-member DJIA is another major win. The DJIA is a price-weighted index which, like the 500-member S&P 500 (SPX), will sometimes replace underperforming members with better-performing ones.
Conversely, Intel has lost its status as the reigning giant among U.S.-based processor producers. As of Monday morning, NVIDIA’s market capitalization stood at $3.37 trillion, while Intel’s hovered at around $97.4 billion.
Index manager S&P Dow Jones Indices explained that the “changes were initiated to ensure a more representative exposure to the semiconductors industry and the materials sector respectively”.
Significance of NVIDIA replacing Intel in the Dow
NVIDIA replacing Intel in the DJIA will affect both companies. That’s because DJIA-tracking index funds, and those who invest in them, will now pour capital into NVIDIA instead of Intel.
However, on a deeper level, the replacement continues the trend of the past few years in which NVIDIA is perceived as a winner, while Intel has apparently lost its way. This is reflected in the relative performances of NVIDIA stock, which is up substantially since AI mania started in 2022, and Intel stock, which is down sharply during that time frame.
