Nvidia (NASDAQ:NVDA) The stock continued its stunning rally in 2024, as shares of the chipmaker have already surged 144% so far this year. And the bright side is that the company has given investors multiple reasons to be optimistic in recent days.
The company announced excellent results for the first quarter of fiscal 2025, which dispelled any doubts about Nvidia’s dominance in the sector. artificial intelligence (AI) flea market. Additionally, it unveiled a new chip architecture that will launch in 2026, a move that could help ensure that it maintains its technological edge on rivals.
Additionally, Nvidia management’s announcement of a 10-for-1 forward stock split appears to have added further momentum to the stock, bringing the company’s market cap to nearly $3 trillion at the time. to write these lines. Nvidia briefly became the second most valuable company in the world after Microsoftexceeding Apple in the charts before falling back to third position.
But can Nvidia overtake Microsoft and possibly reach a $5 trillion market cap following its stock split? Let’s find out.
Nvidia stock has soared since its last stock split
First, investors should note that a stock split is only a cosmetic measure. It does not change a company’s fundamentals, market capitalization or prospects. In a forward stock split, a company simply increases its number of shares outstanding while keeping the market capitalization intact. So in Nvidia’s case, a 10-for-1 forward stock split that went into effect on June 7 means that if you owned a single share before the split, you would now have 10 shares.
However, the value of your investment will not change since the price of each Nvidia stock will be reduced to reflect the split. This clearly shows that Nvidia’s stock split will not change the company’s fundamentals and growth drivers, nor is it expected to affect its market performance.
At the same time, it is believed that stock splits could increase demand for a company’s shares. Investors who could not afford to buy Nvidia shares earlier will now be able to do so, as the price of each stock will drop significantly after the split due to the increase in the number of shares. Of course, many brokerage firms allow investors to purchase fractional shares, so the concept of a split may be redundant for those investors.
However, looking at Nvidia’s previous stock split, which took place in July 2021, we see that its shares have appreciated significantly since then. Nvidia management announced a 4-for-1 forward stock split on May 21, 2021, and trading began on a split-adjusted basis starting July 20 of the same year.
Nvidia stock has soared 706% since announcing its 4-for-1 split in May three years ago.
Its market capitalization has fallen from $373 billion on May 21 to just under $3 trillion today. Now, past performance is no indicator of a company’s future, and buying Nvidia after its stock split in anticipation of a repeat of its superb run because…
