Nvidia may be an exciting stock, but its 10-to-1 stock split — like most stock splits — is just a hamburger.

If you don’t know much about semiconductor giant Nvidia (NASDAQ:NVDA), it is worth learning, as the company has seen huge success in the field of artificial intelligence (AI) lately. Nvidia is often in the news, and most recently it’s due to a 10-for-1 stock split that has many investors excited.

But most stock splits – including this one – aren’t as exciting as they seem. Before we get into stock splits, let’s agree that Nvidia, the company, East exciting. Its stock market performance is certainly:

Period

Average annual inventory gain

1 year ago

192%

last 3 years

89%

last 5 years

103%

last 10 years

73%

last 15 years

50%

Data source: Morningstar.com, as of June 3, 2024.

These are staggering numbers. An annual return of 50% will multiply an investment by more than 437 times over 15 years! If you had only owned Nvidia for the past five years, the value of your stake would have doubled on average each year.

Nvidia’s stock performance is exciting because the underlying business is exciting. Over the years, Nvidia has gone from being a specialist in gaming chips to one that now derives most of its revenue from its data center technology. This is due to the increasing prevalence of artificial intelligence (AI), which increasingly requires semiconductor firepower.

Check out some more interesting numbers from Nvidia:

Year

Total income, in billions

2024

$60.9

2023

$27.0

2022

$27.9

2021

$16.7

2020

$10.9

2019

$11.7

2018

$9.7

2017

$6.9

2016

$5.0

Data source: Morningstar.com.

In Nvidia’s first quarter of fiscal 2025, revenue grew 262% year-over-year! And total revenue for the past 12 months stands at nearly $80 billion, with artificial intelligence fueling data center growth. (In fact, AI could even fuel the growth of Nvidia’s gaming business.)

Nvidia’s stock split isn’t that exciting

Despite the legitimate excitement over Nvidia and its actions, the excitement over its 10-for-1 stock split (which took place on June 7) is misplaced. Shares have surged more than 20% as of June 3 since the company reported impressive first-quarter results and the May 22 stock split.

What is a stock split?

Stock splits increase the number of shares while proportionally decreasing the value of each share. A common split formula is 2-for-1, where you end up with two shares for each one you owned before the split, and the share price is halved. But let’s see what happens with the Nvidia split.

Imagine you own 10 shares of pre-split Nvidia, priced at, say, $1,160 per share. The total value of your shares is $11,600. When the shares are split, you will end up with 100 shares. But the stock price will suddenly be about a tenth of what it was, or about $116 apiece. Multiply your 100 shares by the price of $116 and you will get a total value of $11,600.

Stock splits are primarily an accounting event and, for most investors, nothing good. In some cases, however, like this one, the split can bring the stock price to a level that is suitable for more investors. Before the split, with Nvidia shares above $1,100, many people might have…

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