NVIDIA, a $3 billion chip giant, is about to undergo a 10-for-1 stock split, making it more affordable for individual investors. Shareholders of record through Thursday, June 6 will receive an additional nine shares after the split. This move could potentially open the door for NVIDIA to be added to the price-weighted Dow Jones Industrial Average. Currently, the stock would be the largest component of the Dow, but it will move lower in the rankings after the split.
Following the split, NVIDIA’s stock price will decrease, making it more accessible to investors. The company has been experiencing a positive trend, with a 30% increase in share price since the split announcement in May. In addition to the split, NVIDIA reported strong sales and earnings, leading to a bullish outlook and plans to increase its dividend. The rise in artificial intelligence is also contributing to NVIDIA’s growth.
Historically, companies that split their shares tend to perform well after the split, regardless of fundamental changes in the company. Data shows that companies announcing stock splits experience an average 25% return over 12 months, compared to 12% for the S&P 500. The lower share price post-split may attract more individual investors, further driving the company’s growth.
Despite the recent surge in share price, NVIDIA is trading at a lower valuation than earlier this year, making it relatively “cheaper.” The stock’s P/E ratio has decreased to around 45 from nearly 60 in February, reflecting rising earnings estimates. Analysts believe that as long as NVIDIA continues to increase its earnings, the stock could maintain its bullish trend post-split.
Other high-profile companies like Walmart and Amazon, which recently underwent stock splits, have also seen continued momentum. Walmart is up more than 15% since its split in February, while Amazon has increased 50% since its split two years ago. This trend may lead to more companies announcing stock splits in the coming months.
Overall, the stock split is expected to make NVIDIA more attractive to a broader investor base and potentially contribute to the company’s continued growth. Investors are optimistic about NVIDIA’s prospects post-split, given its strong earnings performance and the ongoing rise of artificial intelligence. It will be interesting to see how NVIDIA performs in the coming months following the stock split.
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