NvidiaIt is (NASDAQ:NVDA) The recent stock split was perhaps one of the most anticipated events on investors’ financial calendars. On June 7, the company completed its 10-for-1 stock split, and shares will begin trading at the split-adjusted price on Monday, June 10. A stock split involves issuing more shares to current holders to lower the price of a stock that has reached high levels. This does not change the overall market value of a company or the valuation of a stock, only the price per share.
Since stock splits are purely mechanical, they are not a reason for you to buy or sell a particular stock – and that means they are not known to cause stock gains or declines . Still, it’s interesting to look at how a stock performs after a split, and now is a great time to look back at Nvidia’s performance following its latest splits.
Does history offer us any clues about where Nvidia stock may perform in the months to come? Let’s find out.
Nvidia’s last three stock splits
Prior to last week’s operation, Nvidia had completed a total of five Stock distribution over time, but we will only consider the last three. This happened in July 2021, September 2007 and April 2006.
In the previous two periods, the stock fell right after the split, but then continued to rise in the following months. However, after the 2007 split, Nvidia shares fell from their post-split high and trended downward for some time.
After the next stock split, in 2021, the shares followed a similar trend – but about a year later, they started to gain momentum.
And by 2023, they were growing, buoyed by optimism about artificial intelligence (AI)-related revenues.
So what does this tell us about what could happen to Nvidia stock in the months to come? It’s important to remember that a few years ago, Nvidia was a very different company, with its high-powered chips generating the bulk of its revenue in the video game industry.
Over the past few years, Nvidia’s sales of its graphics processing units (GPUs) to AI customers have soared, and that business has outpaced gaming. For example, in the most recent quarter, gaming revenue was $2.6 billion, while data center revenue exceeded $22 billion.
A difficult comparison
This means it’s difficult to compare Nvidia’s stock performance before the AI boom to today’s stock performance. Among the charts, however, the one for 2021 is the most relevant because at that time, Nvidia was seeing an increase in revenue from its data center business. For example, in the first quarter of 2021, data center revenues had already increased by double digits.
But here’s the key thing to note: The incremental gains we saw in the years following the 2021 stock split were not due to the stock split itself. Instead, Nvidia’s impressive revenue growth and investor optimism about its future in AI boosted performance.
And now, as we look to the future,…
