Intel was among the first two technology firms to be included in the Dow Jones Industrial Average during the late 1990s dot-com boom, alongside Microsoft. Currently, a decline in Intel's stock price may jeopardize its position in this prestigious index.

Analysts and investors suggest that Intel is likely to be removed from the Dow, citing a nearly 60% drop in its shares this year, which has made it the poorest performer on the index and resulted in the lowest stock price within the price-weighted Dow.

On Tuesday, the chipmaker's shares fell approximately 7% amid a broader market downturn, with the Philadelphia SE Semiconductor index declining nearly 6%, following reports of reduced global chip sales in July.

A removal from the index would further damage Intel's already tarnished reputation.

The company has missed opportunities in the artificial intelligence sector after opting out of an investment in OpenAI, and losses are accumulating in its contract manufacturing division, which it has been expanding to compete with TSMC.

To facilitate a turnaround, Intel suspended its dividend and announced layoffs affecting 15% of its workforce during last month's earnings report.

However, some analysts and a former board member believe these actions may be insufficient and untimely for the company.

"Intel's removal was likely anticipated," stated Ryan Detrick, chief market strategist at the Carson Group. He added that the latest results could be the decisive factor leading to the company's exit from the Dow.

According to UBS Securities, total global semiconductor sales fell 11.1% in July compared to June and were below the five and ten-year averages, primarily due to a decline in memory chip sales.

"Market demand is unfavorable for Intel, compounded by errors in their product strategy," remarked Kinngai Chan, an analyst at Summit Insights Group.

Additionally, Reuters reported that Intel CEO Pat Gelsinger and key executives are expected to present a plan to the company's board later this month aimed at divesting non-essential businesses and restructuring capital expenditures.

S&P Dow Jones Indices, the organization responsible for managing the Dow, has refrained from commenting on the potential removal of Intel from the index.

Adjustments to the index are made as necessary, with the most recent change occurring in February when Walgreens Boots Alliance, a struggling pharmacy chain, was replaced by Amazon.com. Unlike the S&P 500 index, which considers market capitalization, stock price plays a crucial role in determining inclusion in the Dow.

The selection committee for the Dow closely observes the price ratio between the highest and lowest stocks in the index, ensuring that the highest-priced stock does not exceed ten times the lowest.

Presently, UnitedHealth Group, the highest weighted stock, is valued approximately 29 times more than Intel.

Furthermore, Intel holds the position of the least impactful member of the index, with a mere 0.32% weight based on its closing price of $20.13 as of August 29.

While the primary consequence of exclusion would be a blow to Intel's reputation, it would also adversely affect its stock, which has plummeted over 70% from its peak in August 2000, resulting in a market capitalization below $100 billion for the first time in three decades.

According to Ryuta Makino, a research analyst at Gabelli Funds, Nvidia may be poised to take Intel’s place on the Dow.

With its stock surging over 160% this year, Nvidia has emerged as one of the most valuable companies globally, largely due to the critical role its chips play in driving generative AI technology.

Additionally, a stock split in May has further enhanced its chances of being included in the index. However, some investors express concerns that Nvidia’s volatility may not align with the Dow’s preference for more stable stocks.

Another potential candidate for replacing Intel is Texas Instruments, a long-established chip manufacturer with substantial production capabilities in the U.S., as noted by Daniel Morgan, senior portfolio manager at Synovus Trust, which holds Intel shares.

Texas Instruments has seen its stock price increase by over 20% this year, reaching $211.09 as of Thursday, which is more in line with the average price of Dow constituents, approximately $209.

David Blitzer, who led the S&P Dow Jones Indices' Index Committee for over 20 years until 2019, indicated that a stock with a price closer to the current average might be favored in the event of a replacement.