Nvidia (NVDA) stock began trading on a new 10-to-1 split basis on Monday. That means one share of the artificial intelligence giant has risen from Friday’s closing price of 1,208.88 dollars to $120.88. The stock fell about 2% shortly after the opening bell.
Report from Dan Howley and Josh Schafer of Yahoo Finance:
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 would 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.
“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.
Stock splits are seen by investors 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 all market regimes,” BofA investment and ETF strategist Jared Woodard wrote in a note to clients.
The trend notably includes the period from 2000 to 2009, in the middle of the unwinding of the tech bubble. Nvidia shares are up about 27% since the company announced the split on May 22.
