BENGALURU (Nov 2): Intel will be replaced by Nvidia on the blue-chip Dow Jones Industrial Average index after a 25-year run, underscoring the shift in the chipmaking market and marking another setback for the struggling semiconductor firm.

Nvidia will join the index next week along with paint-maker Sherwin-Williams, which will replace Dow, S&P Dow Jones Indices said on Friday.

Once the dominant force in chipmaking, Intel has in recent years ceded its manufacturing edge to rival TSMC and missed out on the generative artificial intelligence boom after missteps including passing on an investment in ChatGPT-owner OpenAI.

Intel's shares have declined 54% this year, making the company the worst performer on the index and leaving it with the lowest stock price on the price-weighted Dow.

Shares of Intel fell 1.6% in extended trading on Friday, while those of Nvidia were up 2.2%.

This development comes a day after Intel expressed optimism about the future of its PC and server businesses, projecting current-quarter revenue above estimates but warning that it had "a lot of work to do".

"Losing the status of Dow Jones inclusion would be another reputational blow for Intel, as it grapples with a painful transformation and loss of confidence," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

"It would also mean that Intel is not included in exchange-traded funds (ETFs) which track the index, which could impact the share price further."

Launched in 1968, the Silicon Valley pioneer sold memory chips before switching to processors that helped launch the personal computer industry.

In the 1990s, "Intel Inside" stickers turned commodity electronic components into premium products, and eventually became ubiquitous on laptops.

Intel's revenue was US$54 billion (RM236.52 billion) in 2023, down nearly one-third from 2021, when Pat Gelsinger took over as chief executive officer. Analysts expect Intel to report its first annual net loss this year since 1986.

The company is worth less than US$100 billion for the first time in 30 years.

That pales in comparison to Nvidia, which is sitting at a US$3.32 trillion valuation, making it the world's second-most valuable company.

Nvidia has emerged as a cornerstone of the global semiconductor industry, thanks to the essential role its chips play in powering generative AI technologies which has driven a seven-fold surge in its shares over the past two years.

The company's shares have risen more than two-fold this year alone.

Once popular only among gamers who hunted for PCs with Nvidia's graphics processors, it is now seen as a barometer for the AI market.

The company's 10-for-one stock split that took effect in June also helped pave the way for its addition to the index, making its soaring shares more accessible to retail traders.

Intel, on the other hand, has struggled to gain share in the AI chip market dominated by Nvidia, with the front-runner's chips hard to get and even harder to replace in AI data centres, owing to the processors' technological edge and the high costs of replacing them.

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