Intel (INTC 3.55%) The stock soared on Friday after reporting poor third-quarter results, but its outlook for the fourth quarter was better than expected. However, the celebration was short-lived S&P Global announced after hours that the rival Nvidia would replace Intel in the Dow Jones Industrial Average (^DJI 1.02%).

S&P Global said the move would provide more representative exposure to the semiconductor industry because the Dow Jones is a price-weighted index and Nvidia's share price is much higher than Intel's. In fact, Intel had the lowest share price of all 30 Dow stocks, meaning it had the least impact on the index. The move will take effect on Friday, November 8, when the index will also swap chemical companies Dow for Sherwin Williams for similar reasons.

Intel has been a Dow company since 1999, so this move marks the end of the company's 25-year history.

Shares of the chip stock sold off on the news, falling 1.8% in after-hours trading. Demotion from the Dow does not have the same impact as removal from the Dow Jones S&P 500 would, as only a few ETFs track the Dow. However, it's another unfavorable sign for Intel, which is embarking on arguably the biggest turnaround in its history.

The DJIA is updated as necessary and its managers aim to provide balanced stock selection across sectors based on the company's reputation, a history of sustained growth and investor interest. The Dow doesn't change components often because S&P Global aims for stability. However, with Intel set to fall from the Dow soon, it's worth taking a look at how previous components performed after being delisted from the Dow.

The track record of the Dow pariahs

Before this announcement, the Dow Jones Industrial Average was reshuffled for the last time Amazon replaced Walgreens Boots Alliance in February. The move came as Walgreens was struggling badly and the index was trying to increase its exposure to consumer retail.

WBA data from YCharts.

Since then, Walgreens has continued to struggle. As you can see from the chart above, the stock is down 55% since then, while the S&P 500 is up 13%. Based on these results, it looks like the index manager made the right decision in dumping Walgreens.

The last changes in the Dow before that were in 2020, when ExxonMobil, PfizerAnd RTX (formerly Raytheon) were removed from the index in favor of Salesforce, AmgenAnd Honeywell. The chart below shows how they have performed since their removal from the Dow.

^SPX data from YCharts.

As you can see, this group of former Dow stocks outperformed the broader market index, even as Exxon shares rose sharply as oil stocks fell sharply as oil prices collapsed during the pandemic. Previously was the last company to be removed from the Dow General Electricwhich was replaced by Walgreens in 2018. GE split into three companies, GE Healthcare, GE AviationAnd GE Vernova However, earlier this year, fueled by CEO Larry Culp's efforts to turn things around, the stock has been a winner since then.

Finally, AT&T was the last stock in the last decade to be removed from the Dow, having been ousted in 2015. It has performed poorly since then, with shares down 12% as the telecoms market has been sluggish and it has lost market share T Mobile.

^SPX data from YCharts.

A 2017 study showed that stocks removed from the Dow had lower initial returns but performed better in the long run than stocks included in the index. However, this finding may not be as reliable.

What it means for Intel

Over the last decade, the results of stocks exiting the Dow have been mixed. Walgreens, Pfizer and AT&T have all underperformed the market, while Exxon, RTX and GE have outperformed.

The study, which shows long-term outperformance for former Dow components, should also be encouraging for Intel investors. Ultimately, the sample size of recent holdings is too small and diverse to draw a firm conclusion. Intel's future depends much more on its ability to turn around in the coming quarters than on its exit from the Dow.

Intel investors should pay attention to the company's cost-cutting initiatives, its upcoming 18A foundry process, and its artificial intelligence (AI) chips that are designed to compete with Nvidia. If the company can stage a comeback, it will likely start with these key initiatives.