BENGALURU: The news that Nvidia is set to replace Intel, after a 25-year run, in the Dow Jones Industrial Average (DJIA) on November 8th marks a significant shift, reflecting the growing importance of AI and data-centred technologies in the global economy.
Nvidia will join the index along with paint-maker Sherwin-Williams, which will replace Dow.
The Dow’s decision to include Nvidia instead of Intel highlights Nvidia’s impressive growth and prominence in areas like artificial intelligence, gaming, and high-performance computing.
Nvidia’s inclusion aligns with the Dow’s effort to represent dynamic sectors in the economy. As of recent years, the Dow has added companies that showcase technological and digital innovation, acknowledging shifting market demands.
The transition reflects not only Nvidia’s astronomical growth—evidenced by a staggering 900 per cent increase in market value over the past two years—but also a broader shift within the investment landscape favouring technology and innovation.
In recent years, Intel has ceded its manufacturing superiority to Taiwan Semiconductor Manufacturing Company (TSMC) and missed the crucial opportunity presented by the generative artificial intelligence boom, particularly through its decision to forgo investment in OpenAI, the creator of ChatGPT.
Intel: Worst performer
The strategic miscalculation has contributed to a staggering 54 per cent decline in Intel’s stock price this year, rendering it the worst performer on the Dow Jones Industrial Average and leading to its market valuation sinking below $100 billion—a threshold not seen in three decades.
Founded in 1968, Intel initially made a name for itself by producing memory chips before revolutionising the personal computer industry with its microprocessors.
The iconic “Intel Inside” branding campaign of the 1990s transformed its components into symbols of quality and innovation, fostering brand loyalty among consumers and solidifying its market position.
However, this once-dominant force in tech has seen its revenue plummet to $54 billion in 2023, a nearly one-third decrease from its 2021 figures. Analysts now anticipate that the company will record its first annual net loss since 1986, a stark indication of its waning influence in the sector.
The DJIA, with its 128-year history, has often been regarded as an emblem of American industrial might. Traditionally composed of blue-chip stocks, the index has undergone numerous transformations to adapt to the evolving economic landscape.
The inclusion of Nvidia, a leader in the semiconductor industry known for its critical role in powering AI advancements, signifies a departure from the traditional industries that have historically characterised the index.
The evolution is particularly poignant in contrast to Intel, which once held a prestigious spot in the DJIA but has struggled to maintain its competitive edge in recent years.
Financial difficulties
While Intel was added to the index in November 1999 along with other leading firms, it now finds itself grappling with financial difficulties, providing a stark reminder of the impermanence of corporate dominance.
With a market capitalisation nearing $3.32 trillion, Nvidia is poised to vie for the title of the world’s most valuable company, potentially surpassing industry titan Apple Inc. in the coming days.
Moreover, the transition within the DJIA underscores a crucial evolution in market representation. The index has been criticised for its narrow focus compared to broader benchmarks like the S&P 500 or Nasdaq.
The recent shifts, including Nvidia’s entry and the prior replacement of Walgreens Boots Alliance by Amazon earlier this year, reflect a concerted effort to align the DJIA with the current economic realities where technology firms increasingly dominate market valuations.
For instance, Salesforce replaced Exxon Mobil in 2020, furthering the representation of cloud computing in the index. Nvidia’s stock performance, market value, and potential growth—especially in AI applications and data processing—have outpaced Intel, contributing to the decision to replace Intel in the index.
For Intel, this removal might feel like a blow, though it still has a significant market presence, especially in the PC and server processor markets. However, challenges with production delays and increased competition from AMD and companies like Nvidia have impacted its position.
Ultimately, Nvidia’s addition to the DJIA reflects its success in the fast-growing AI and high-tech sectors, marking it as a company with considerable influence in today’s digital-first economy.
Ultimately, the trajectory of both Intel and Nvidia serves as a poignant reminder of the rapid shifts within the semiconductor industry—where innovation, strategic investments, and market positioning are critical determinants of success.
As Intel strives to reclaim its legacy, the contrasts with its rivals illuminate the pressures and imperatives that define the modern technological era.
