June 24, 2024

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Nvidia stock rose after a 10-for-1 stock split

Nvidia stock rose after a 10-for-1 stock split

Nvidia (NVDA) shares began trading on Monday on a new 10-for-1 split, adjusting the stock’s closing price on Friday from $1,208.88 to $120.88. The stock closed up about 1% on the first day after the split.

This split means that holders of Nvidia common stock owned as of Thursday’s market close received 10 shares for every share they owned. For example, if a shareholder owned four shares of Nvidia as of Thursday, he now owns 40 shares after the split.

A stock split makes owning shares of stock more affordable by lowering the price of individual shares without diluting the value of the current shareholders’ total holdings.

FILE - CEO Jensen Huang walks on stage before the Nvidia GTC keynote in San Jose, Calif., Monday, March 18, 2024. Nvidia's stock price has jumped 92% this year as of Wednesday, May 22, increasing the company's market value by more than 1. Trillion dollars.  These numbers are set to rise again on Thursday after the company reported better-than-expected quarterly results.  (AP Photo/Eric Risberg)

CEO Jensen Huang walks on stage before the Nvidia GTC keynote in San Jose, Calif., Monday, March 18, 2024. (AP Photo/Eric Risberg) (News agency)

“The stock split will make Nvidia more accessible to a lot of these retailers,” Matt Amberson of Option Research & Technology Services told Yahoo Finance last Thursday. “Now, you rarely see a stock over $1,000 with an implied volatility of 50%, so options prices are extraordinarily high, so options traders are really looking forward to the split.”

Nvidia’s split comes after the company’s total market cap briefly topped $3 trillion on Wednesday, pushing the chip company past Apple to become the second-largest publicly traded US company.

Nvidia shares have soared thanks to the explosion in interest in generative AI that began when OpenAI first launched ChatGPT in late 2022. Since then, hyperscalers like Amazon (AMZN), Google (GOOG, GOOGL), and Microsoft (MSFT) have ) are struggling to get Nvidia hardware to run their generative AI platforms.

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This sent Nvidia’s revenue through the roof. In the first quarter, Nvidia reported adjusted earnings per share of $6.12 on revenue of $26 billion, an increase of 461% and 262%, respectively, compared to the same period last year.

Nvidia’s data center revenue last quarter rose 427% year over year to $22.6 billion, representing 86% of the company’s total revenue for the quarter. Nvidia’s gaming segment, once its most important business, saw revenue of $2.6 billion.

And Nvidia continues to develop new hardware to keep customers coming back for more. On June 3, CEO Jensen Huang announced an upgraded version of its Blackwell AI platform, called Blackwell Ultra, coming in 2025 as well as an all-new platform called Rubin set for 2026. In 2027, the company will release an Ultra version of the hardware Robin.

Investors view stock splits as a sign of strength, and thus, companies that do stock splits typically outperform the S&P 500 in the year following their announcement.

On average, stocks rose 25% in the 12 months after announcing their split compared with an average return of 12% for the S&P 500 in the same time frame, according to an analysis by Bank of America. This has been true “across market systems,” Jared Woodard, an investment and ETF strategist at Bank of America, wrote in a note to clients.

It is worth noting that this trend includes the time period from 2000 to 2009, amid the disintegration of the technology bubble. Nvidia shares have risen about 27% since the company announced its split on May 22.

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Nvidia’s stock split comes as AMD (AMD) and Intel (INTC) chase, announce their own AI hardware and lay out their future product roadmaps as alternatives to Nvidia. Nvidia customers are also developing their own AI chips to train and run AI models to help mitigate the cost of purchasing new Nvidia products.

However, it’s not just about the super scale. Meta (META), Tesla (TSLA), and a slew of other major tech and auto companies are seeking to grab Nvidia chips to train and deploy AI models for everything from recommendation engines to self-driving software.

What’s more, Nvidia says it has a growing total addressable market outside of tech companies, including government organizations, research institutions and more, which means it may have a lot of runway to go.

Email Daniel Howley at [email protected]. Follow him on Twitter at @Daniel Holly.

Josh Schaeffer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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