Could Intel be kicked out of the Dow Jones index?

• An analyst at the Carson Group believes that Intel is likely to be removed from the Dow Jones.
• INTC shares were down 6% on Tuesday and 59% for the year.
• Intel is rumored to be considering selling its FPGA unit to Marvell.
• Intel shares account for just 0.35% of the DJIA.

Intel (INTC) shares fell on the first day of trading this week after CEO Pat Gelsinger was said to be considering selling Altera’s former unit that makes field-programmable gate drive (FPGA) chips.

INTC fell around 6% on Tuesday morning, as rumors emerged about whether the Dow Jones Industrial Average (DJIA) could remove Intel from its index altogether. The Dow Jones index is down 1.1% midday Tuesday after U.S. manufacturing data showed a contraction in August. This comes after the DJIA hit another all-time high last week. The NASDAQ is also down an impressive 2.5% on Tuesday.

Intel stock news

News emerged Monday that Intel is considering selling its FPGA unit, originally called Altera, which it acquired for $16.7 billion in 2015. Getting rid of the high-margin unit would help the company immediately improve its balance sheet as it tries to stem large losses stemming from its foray into third-party chip manufacturing.

The rumor is that the up-and-coming semiconductor company Marvell Technology (MRVL) is the suspected buyer, and Raymond James analysts believe the unit could fetch between $18 billion and $22 billion.

FPGA chips tend to be high-gross margin products, Raymond James says, but the unit’s revenue has been on a downward trajectory lately, with analysts predicting revenue will be $1.9 billion in 2025, about $1 billion lower than in 2023.

“[Una] “Direct sales appear viable and should significantly strengthen Intel’s balance sheet,” writes analyst Srini Pajjuri.

Despite considering slowing down its entry into the German semiconductor market, Intel is partnering with a Japanese research institution to build a research lab for studying EUV technology in chip design. Companies will pay a fee to access experimental equipment at the center, which is expected to be up and running within five years.

Removed from the Dow Jones index?

A Carson Group analyst predicts that Intel will soon be kicked out of the Dow Jones index just as it approaches its 25th anniversary of inclusion.

“Intel’s takedown has probably been a long time coming,” said Ryan Detrick, chief market strategist at Carson Group.

INTC stock is down 59% year to date and has essentially been in a downtrend since hitting an all-time high in August 2000, though the stock has rebounded close to that level in both 2020 and 2021. Intel entered the Dow in November 1999.

INTC now accounts for about 0.35% of the Dow, and Detrick said its uncertain outlook sets it up to be displaced. Similarly, Amazon (AMZN) replaced Walgreen Boots Alliance (WBA) in the index last February when that pharmacy chain was going through difficult times.

Intel Stock Forecast

Intel stock, of course, is trading well below all relevant moving averages on the weekly chart. The 26-week, 52-week and 104-week simple moving averages (SMAs) are all between $30.90 and $36.45, while INTC is down another 6.7% as of midday Tuesday to trade at $20.57.

Huge losses, the end of its dividend and the reduction of its workforce by 15% have not been enough to satisfy Wall Street. Short-term support lies at $19.00, but at this point it is difficult to even have confidence in that price level. This is the worst period for Intel in half a century or perhaps in its entire history.

Things may start to look up if INTC stock reclaims the previous support level of $24.90 from February 2023. However, falling out of the DJIA is a recipe for disaster.

INTC Stock Weekly Chart