Up 377%, Is Intel Proving Why It Was a Mistake for Nvidia to Replace Intel in the Dow Jones Industrial Average?

When Intel (INTC +3.56%) was added to the Dow Jones Industrial Average (^DJI +0.19%) in November 1999, it was a sign of the tech industry’s rising importance to the U.S. stock market — Intel and another new addition, Microsoft, were the first two stocks from the tech-heavy Nasdaq exchange to join the DJIA.

When Intel was replaced in the Dow by Nvidia (NVDA +1.90%) in November 2024, the chipmaker had lost not only market share and prestige, but also 65% of its stock value since the peak it reached in 2000 just before the dot-com bust. 

But Intel has since proved the doubters wrong. Up more than 240% year to date and about 377% since being kicked out of the Dow, Intel has now easily eclipsed its previous high. At recent prices, Intel sports a market cap of more than $640 billion — making it the 15^th most valuable S&P 500 (^GSPC +0.19%) component. What’s more, Nvidia has only gained 46% since being added to the Dow, far less than Intel.

Here’s why Intel’s 25-year stint in the Dow came to an end, and whether it was a mistake to replace it with Nvidia.

Intel’s fall

With just 30 components, the Dow has only so many seats. Each company is added for its industry leadership, but to stay in the Dow, they must continue innovating. Intel didn’t do that.

Intel has long been known for its vertically integrated model, meaning it designs and manufactures its chips, a potential source of competitive advantage if executed well. But Intel lost market share to fabless companies like Nvidia and Advanced Micro Devices, which have high margins because they don’t manufacture their own chips. And on the manufacturing front, it lost market share to foundries like Taiwan Semiconductor Manufacturing and Samsung Electronics. So Intel became a low-growth stalwart whose declining earnings and margins eventually made its dividend unaffordable. Intel cut its dividend in 2023 and suspended it in 2024.

Here was a company that no longer paid a dividend; had spent decades badly underperforming the major indexes; was losing market share; was not benefiting from the artificial intelligence (AI) boom; and was the lowest-priced stock in the Dow.

Unlike the S&P 500 and Nasdaq, which are market-cap weighted, the Dow is price-weighted. So Dow components with higher stock prices, like Goldman Sachs and Caterpillar, have the highest weights, even though their market caps are magnitudes lower than giants like Nvidia, Microsoft, and Apple. At the time of its removal, Intel’s stock price was less than 5% that of Goldman Sachs, adding pressure to replace it with a chip stock that could better contribute to the index’s gains.

Today’s Change

(3.56%) $4.45

Current Price

$129.37

Key Data Points

Market Cap

$628B

Day’s Range

$123.92 – $132.74

52wk Range

$18.96 – $132.75

Volume

5.9M

Avg Vol

109M

Gross Margin

35.90%

Intel’s recovery

Intel’s cost cuts, restructuring, new management, growth of Intel Foundry services, and key partnerships flipped the narrative that Intel wouldn’t be a winner in the age of AI. Intel’s latest results show solid growth in its data center and AI segment, driven by increased demand for central processing units (CPUs).

The shift from training AI models to AI inference and agentic AI is driving industrywide demand for CPUs, memory chips, and new custom accelerators purpose-built for inference, rather than relying solely on graphics processing units (GPUs), long Nvidia’s specialty. Broadcom is working with hyperscalers like Alphabet to design separate chips for training and inferencing.

Nvidia’s rack-scale solution under its Vera Rubin architecture features six chips, including a GPU, CPU, memory chips, and interconnects. Similarly, Advanced Micro Devices has nearly doubled this year due to increased demand for its CPUs and GPUs.

Stocks like Sandisk and Micron Technology are up several-fold this year due to massive demand for AI memory, storage, and infrastructure.

Thanks to AI inferencing, Intel has a much more defined role in the AI ecosystem. Its dominant share of the server CPU market and the development of custom AI accelerators are helping it land high-profile deals with hyperscalers, including its multi-year collaboration with Alphabet to deploy Intel Xeon processors and infrastructure processing units to power Google Cloud infrastructure across AI and general-purpose workloads.

Analyst consensus estimates now forecast Intel’s earnings per share to surge to $1.53 in fiscal 2027, which would be a 40.4% increase from fiscal 2026 full-year average estimates. Intel now has a clear runway for high-margin earnings growth, but its valuation has gotten considerably more expensive — with Intel trading at 115 times forward earnings compared to 25.8 for Nvidia.

There’s room for more than one chip stock in the Dow

Hyperscalers are building custom chips and turning to application-specific integrated circuits, such as those from Broadcom and Intel, to reduce their dependence on GPUs. AI inferencing is driving a surge in demand for AI networking, memory, and storage infrastructure. However, it’s a mistake to assume that Nvidia is just a GPU data center company.

As mentioned, its new solutions for hyperscalers include much more than just GPUs. And it’s incredibly well-positioned to capitalize on increased compute demand for physical AI applications such as robotics, self-driving cars, and automation.

Even after Intel’s recent rapid rise, Nvidia is still worth eight times as much as Intel. And it’s valued more for its existing earnings rather than what it could produce years down the road. At $215.20 per share at the time of this writing, Nvidia is right around the median price of a Dow component, so it can have a larger impact on the index than if Intel were still in.

All told, Intel’s investment thesis has definitely gotten more exciting, and it’s proven why it was way too beaten down, but Nvidia is the more deserving Dow component. That said, if Intel continues on its trajectory, there could be a case for Intel replacing a tech stock like Salesforce, International Business Machines, or Cisco Systems in the Dow to better reflect the different subsets of the increasingly important semiconductor industry in today’s market.