(Reuters) – Nvidia’s 10-for-1 stock split aimed at attracting retail investors has taken effect, sparking speculation about the AI barometer’s chances of inclusion in the blue-chip Dow index.
The split, aimed at reducing the value per share to make it more affordable for employees and investors, increases the number of outstanding shares of the company without changing the stock’s valuation.
“A side effect of Nvidia’s stock split will put it in contention to follow Amazon and Apple in the Dow, which could potentially oust fellow Intel, which currently has the lowest weighting,” said Ben Laidler, Global Markets Strategist at Digital. eToro brokerage.
The stock fell 0.5% in premarket trading Monday, after climbing nearly 27% since the company announced the stock split and strong guidance last month. The dominant AI chip maker also reached $3 trillion in market value and overtook Apple to become the second most valuable company in the world, behind Microsoft.
Market analysts have said stock splits tend to attract individual investors who trade in smaller lots and have less capital to deploy than institutional investors.
However, Goldman Sachs strategists led by David Kostin said in a note that the most recent stock splits have not generated a significant increase in retail trading activity, but that there has been some notable exceptions such as Amazon’s split in 2022 and Nvidia’s split in 2021.
Additionally, “investors generally assign higher valuations to liquid stocks due to their low trading costs and flexibility in various market environments,” the strategists said.
In recent years, trading volumes briefly increased following stock split announcements but showed little change during and after splits took effect, according to Goldman’s analysis of 45 splits. of Russell 1000 stocks since 2019.
Nvidia’s stock last traded at $120 per share after the split, down from $1,200 on Friday, making it a potential contender for the 30-member price-weighted Dow index.
In late May, a spokeswoman for S&P Dow Jones Indices said it does not comment or speculate on index additions or deletions.
(Reporting by Medha Singh in Bengaluru; additional reporting by Pranav Kashyap; editing by Devika Syamnath)
