DOW: Index May Drop Intel & Replace it With Nvidia
America’s most famous index, the Dow Jones Industrial Average may replace Intel with Nvidia due to Intel’s dire performance.
Word on the street is that colossal chipmaker could be leaving Wall Street’s best-known index after nearly 25 years. The company’s stock (INTC) has lost over 70% from its high in 2020 of $68 as of yesterday’s close at $20.10.
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Intel was one of the first companies that emerged from the Dot.com boom taking part in the world-famous index. However, Intel hasn’t been able to keep up the pace with its peers in the AI driven rally.
The company has faced the loss of a significant market share and in the last quarter has needed to cut 15% of its workforce, as well as suspend dividend payments. The selection committee of the DOW consider the price of shares in the index.
Whereas the S&P 500 only considers the market cap of the index’s components, the DOW consider whether the price of the stock with the highest weight is 10 times or more the price of the stock with the lowest.
Currently the stock with the largest weighting is UnitedHealth Group (UNH), while Intel has the lowest. Using Yesterday’s close UNH is priced at 29 times the price of INTC. We also know that Nvidia has spiked over the past year gaining 160%.
Yet with the current correction in price the stock has dropped nearly 23%. The inclusion in the DOW may come just in time to prop up the stock’s price. Many funds that are indexed to the index will become net buyers.
There is a possibility of positive momentum for Nvidia if this rumor is confirmed.
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