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Nvidia Stock Split: Making Shares More Accessible and Bolstering Market Value
On Monday, Nvidia's stock began trading under new terms, adjusting the Friday closing price from $1,208.88 to $120.88, with a nearly 1% increase on its first trading day post-split. This 10-for-1 stock split means shareholders who owned Nvidia stock as of last Thursday now hold ten times the number of shares they previously owned. For instance, a shareholder with four shares now has forty shares after the split.
Stock splits are designed to make shares more affordable while preserving the total value of an investor’s holdings. Matt Amberson from Option Research & Technology Services indicated that Nvidia’s split enables more retail traders to participate, noting that stocks priced over $1,000 with high volatility often have expensive options, which traders look forward to benefiting from the split.
Market Valuation and Revenue Growth
Nvidia's market valuation has surged, positioning it behind only Apple amongst publicly traded US companies. This surge is driven by the increasing demand for generative AI technologies, particularly since the release of OpenAI's ChatGPT in late 2022. Major tech firms like Amazon, Google, and Microsoft are in fierce competition to secure Nvidia's hardware to support their own generative AI platforms, leading to unprecedented revenue growth for Nvidia.
In the most recent quarter, Nvidia reported adjusted earnings per share of $6.12 on $26 billion in revenue, marking year-over-year increases of 461% and 262%, respectively. Data Center revenue, which now constitutes 86% of the company's total, jumped 427% to $22.6 billion. Nvidia’s gaming segment also performed strongly with $2.6 billion in revenue.
Future Hardware Development
To maintain its edge, Nvidia is continuously innovating. CEO Jensen Huang announced that 2025 will see the release of the upgraded Blackwell Ultra AI platform, followed by the entirely new Rubin platform in 2026, with an Ultra version slated for 2027. This continuous development is key to keeping its customer base loyal and expanding.
Stock Split Trends and Market Performance
Historically, companies that perform stock splits tend to outperform the S&P 500, with an average rise of 25% in the year following the announcement compared to the S&P 500's 12% return. Bank of America's analysis indicates this trend has persisted across different market conditions, including during the early 2000s tech bubble period. Since Nvidia announced its split on May 22, its shares have climbed approximately 27%.
Competitors and Broader Market
Nvidia's competitors like AMD and Intel are also intensifying their efforts by introducing AI hardware and outlining future products. Beyond hyperscalers, companies such as Meta and Tesla, as well as numerous other tech and automotive giants, are vying for Nvidia’s AI chips to deploy advanced AI models. Nvidia is additionally broadening its market reach to include government agencies and research institutions, suggesting substantial growth potential ahead.
