Twenty-five years ago, Intel made history by becoming one of the first two tech companies to be included in the Dow Jones Industrial Average. Now, Nvidia — also a chip company — has replaced Intel in the blue-chip index following a seven-fold gain in its share price over the past two years. This is just the beginning of the shake-up facing the chip sector.
Demand for artificial intelligence chips that power generative AI technologies remains strong, with high-end AI chips still in short supply. Meanwhile, there are only a handful of chipmakers operating in this lucrative market — which would seem to guarantee earnings growth and share price gains for the sector.
Yet investing in chip stocks has been an extraordinarily risky bet this year. Shares of Intel are down nearly 50 per cent while Nvidia has tripled, now the best performing stock in the benchmark. What is behind this extreme divergence in fortunes between chip stocks?