Investors have been wondering if Nvidia (NASDAQ: NVDA) will split its stock for months. The tech giant's stock rose to nearly $1,000 in recent years. After Nvidia's earnings report and stock split, it reached $1,000 this week. The chip designer's shares will drop after the split.
This won't affect Nvidia's $2.3 trillion market cap. Instead, a stock split issues extra shares to present shareholders, which lowers the price of the stock and gives them the same dollar worth. Nvidia stated in its release that the price cut will make the stock more accessible to investors. As Nvidia takes the step many investors waited for, should you buy shares?
Avoid buying a stock solely because the company split—it's just a mechanical procedure. A stock split won't change its worth. If so, why do investors care if a corporation splits its stock?
The move often indicates that a corporation is enthusiastic about its future and feels its shares can rise again. Recently, the company has had strong earnings, which has driven stock price gains. By splitting its shares, a corporation implies that those gains aren't done and that the stock may rise again and even return to its pre-split level.
Nvidia's 10-for-1 stock split began June 7. If you possess one Nvidia share today, you'll own 10 after the split, but the value will remain the same. Nvidia shares will decrease to $100 per share following the split if they were $1,000 previously.
This move will make investing easier for those without fractional shares or who prefer complete shares. Some investors hesitate to buy even at fair valuations because $1,000 is a psychological barrier. Nvidia's stock split will allow them to invest in this tech powerhouse. Five stock splits have occurred at Nvidia in 24 years. Each time Nvidia split, the stock price was much lower than it is today, thus I'm not surprised they did it now.
Demand exceeds supply, and as Nvidia prepares to debut its new Blackwell architecture and most powerful processor, demand is likely to remain high. Particularly given AI market expectations. By the end of the decade, analysts expect the market to exceed $1 trillion. All of these suggests Nvidia will grow.
Nvidia shares price at 34 times forward earnings forecasts, which is reasonable given long-term expectations. You can acquire Nvidia before or after the stock split.