The recent Nvidia (NVDA) stock split was a 10 for 1 split taken on last week. This move increased the number of Nvidia shares tenfold, while the company’s valuation remained the same.
Investors favor these moves for more flexibility and attractive options trading. Here’s more on why I think Nvidia’s recent stock split could be a good thing from the global chip giant.
10 for 1 Stock Split
Stock splits allow investors and prospects to buy shares of a company at a more affordable price, without affecting existing shareholders’ holdings.
Matt Amberson of Option Research & Technology Services stated that Nvidia’s split would make the stock more accessible to retail traders. Expect higher trading volumes due to Nvidia’s implied volatility. With a bullish market, there could be more upside until the rally ends.
The split took place after Nvidia already overtook Apple (NASDAQ:AAPL) as the world’s second most valuable company, reaching a $3 trillion market cap. NVDA stock has continued to rise because of the growing interest in generative AI.
Big Tech companies all around the world are looking to compete with Nvidia on the hardware and software front, but for now, most have been forced to work with Nvidia’s hardware to support its AI innovations.
Nvidia’s Q1 revenue skyrocketed, with adjusted earnings per share of $6.12 coming on $26 billion in revenue, up 461% and 262% respectively. Data Center revenue jumped 427% to $22.6 billion, dominating 86% of total revenue. C
EO Jensen Huang announced new platforms, Blackwell Ultra for 2025, Rubin for 2026, and Rubin Ultra for 2027, to drive future growth.
How Will a Stock Split Impact NVDA Stock?
Stock splits signal strength to investors, often leading companies to outperform the S & 500 post-announcement.
On average, stocks rise 25% in the 12 months after a split announcement, compared to the S & 500’s 12% return, according to Bank of America (NYSE:BAC). Nvidia shares have risen 27% since announcing their split on May 22.
The stock split also happened after a tight competition with Advanced Micro Devices (NASDAQ:AMD), who also introduced their latest AI chip. Nvidia customers are also making their own AI chips to reduce reliance on Nvidia.
Nvidia’s market is expanding beyond tech firms to include government and research institutions, indicating further growth potential.
Possible Dow Inclusion
The stock split aimed to lower per-share value, making Nvidia more affordable for employees and investors, while increasing outstanding shares without affecting market valuation.
Ben Laidler from eToro noted the split could position Nvidia to join the Dow, potentially replacing Intel (NASDAQ:INTC). Various experts have cautioned that Nvidia might experience buyer exhaustion following the split.
Following the split, Nvidia’s stock traded at $120 per share, down from $1,200 on Friday, making it a potential candidate for the Dow index. An S & Dow Jones Indices spokeswoman declined to comment on index changes.
NVDA Stock Remains a Strong Buy
Nvidia’s extraordinary growth stems largely from the soaring demand for its AI chips. In fiscal 2024, the data center segment contributed $47.5 billion of its $60.9 billion revenue. And in Q1 of fiscal 2025, data center revenue surged 427% year over year to $22.6 billion, indicating robust growth.
In 2021, Nvidia also took on a stock split that improved share appreciation among investors. The 4-for-1 split began in July of that year, and since then, Nvidia’s stock saw a 706% rise.
For those looking for a company that’s not short on catalysts right now, Nvidia is it. I think the company’s stock split is just the latest reason investors want to consider this highflying stock. Until something changes, this is the company investors want to own long-term.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
