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Nvidia Shares Begin Trading on a New 10-for-1 Split Basis
Nvidia shares started trading Monday at a revised price of $120.88, following a 10-for-1 stock split from its previous closing price of $1,208.88. The split benefits shareholders who now hold 10 shares for every one share they previously owned, making the stock more accessible and affordable. This move is particularly attractive to retail traders, according to Matt Amberson from Option Research & Technology Services. High option prices, due to Nvidia's significant implied volatility, further elevate trader interest in the split.
Market Valuation and Revenue Surge
The split comes as Nvidia's market valuation has surged, making it the second-most-valuable publicly traded company in the US, surpassing even Apple. Much of this growth is attributed to the booming interest in generative AI, accelerated by OpenAI's release of ChatGPT in late 2022. Tech giants like Amazon, Google, and Microsoft have been clamoring to acquire Nvidia's hardware to support their generative AI platforms, significantly boosting Nvidia's revenue. The company recently reported adjusted earnings per share of $6.12 on $26 billion in revenue, marking year-over-year increases of 461% and 262%, respectively.
Breakdown of Revenues
Nvidia’s Data Center revenue skyrocketed 427% year-over-year to $22.6 billion, comprising 86% of the company's total quarterly revenue. Although its gaming segment, once its primary revenue driver, reached $2.6 billion, the growth in data center demand is pivotal. Nvidia continues to innovate and develop new hardware, with plans to release an upgraded version of its Blackwell AI platform called Blackwell Ultra in 2025 and a new platform named Rubin in 2026. An Ultra version of the Rubin hardware is slated for 2027.
Investor Confidence and Stock Performance
Stock splits are generally regarded as a sign of financial health. Historically, companies that announce splits tend to outperform the S&P 500 in the following year. Analysis from Bank of America indicates that such companies, on average, see a 25% rise in stock prices within 12 months of the split announcement, compared to the S&P 500's 12% average return. Since Nvidia announced its split on May 22, shares have already increased by about 27%.
Competitive Landscape and Future Prospects
Nvidia’s stock split comes as competitors like AMD and Intel gear up with their own AI hardware and product roadmaps. Customers, including major tech and automotive firms like Meta and Tesla, are also developing proprietary AI chips to reduce dependency on Nvidia. Nvidia remains optimistic, noting a growing market that extends beyond tech to include government bodies and research institutions, indicating substantial future potential.
With Nvidia’s continued innovation and robust market positioning, the company’s prospects appear promising as it navigates a highly competitive landscape.
