Nvidia Stock Rises After 10-for-1 Stock Split

Nvidia (NVDA) stock began trading on a new 10-to-1 split basis on Monday, revising Friday’s stock closing price of $1,208.88 to $120.88. The stock closed up almost 1% on the first day following the split.

The split means that owners of Nvidia common stock held as of market close Thursday received 10 shares for every share they owned. For example, if a shareholder owned four shares of Nvidia on Thursday, they now own 40 shares after the split.

Stock splits make owning stock more affordable by lowering the price of individual shares without diluting the value of existing shareholders’ total holdings.

CEO Jensen Huang takes the stage before the Nvidia GTC keynote in San Jose, Calif., Monday, March 18, 2024. (AP Photo/Eric Risberg) (ASSOCIATED PRESS)

“The stock split is going to make Nvidia much more accessible to a lot of these retail traders,” Matt Amberson of Option Research & Technology Services told Yahoo Finance last Thursday. “Now you rarely see a stock above $1,000 with 50% implied volatility, so options prices are extraordinarily high, so options traders are really looking forward to the split.”

Nvidia’s split comes after the company’s total market valuation briefly eclipsed $3 trillion on Wednesday, pushing the microchip company past Apple to become the second most valuable U.S. company on the stock market.

Nvidia shares have soared on the explosion of interest in generative AI that began when OpenAI launched its ChatGPT software in late 2022. Since then, hyperscalers like Amazon (AMZN), Google (GOOG, GOOGL) and Microsoft (MSFT) have been battling to get their hands on Nvidia’s hardware to power their own generative AI platforms.

This caused Nvidia’s revenue to explode. In the first quarter, Nvidia reported adjusted earnings per share of $6.12 on revenue of $26 billion, increases of 461% and 262%, respectively, compared to the same period of the year. last year.

Nvidia’s data center revenue last quarter grew 427% year over year to $22.6 billion, representing 86% of the company’s total revenue for the quarter. Nvidia’s gaming segment, which was previously its largest business, reported revenue of $2.6 billion.

And Nvidia continues to develop new hardware to retain customers. On June 3, CEO Jensen Huang announced that an upgraded version of its Blackwell AI platform, called Blackwell Ultra, would arrive in 2025, as well as an entirely new platform called Rubin, due in 2026. And in 2027 , the company will release an Ultra version of the Rubin hardware.

Investors view stock splits as a sign of strength, and as a result, companies that split their shares typically outperform the S&P 500 in the year following their announcement.

On average, stocks rise 25% in the 12 months after announcing their split, compared with an average return of 12% for the S&P 500 over the same period, according to Bank of America analysis. This has been true “across the market…”

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