Nvidia shares are about to get a whole lot cheaper, and, no, that's not some bold prognostication for the world’s hottest stock: the artificial intelligence semiconductor chip designer is on the cusp of executing a stock split announced last month.
Nvidia's billonaire CEO Jensen Huang speaks in Taiwan over the weekend.
Nvidia’s stock will split 10-for-1 after Friday’s market close, a move announced May 22 as part of its blowout quarterly earnings report, with shares trading at their new post-split price beginning next Monday.
That means Nvidia shareholders will receive nine additional shares for each share they owned prior to the split, which will cut the value of each share to a tenth of its prior value.
The split will trim Nvidia’s share price from its roughly $1,140 share price Monday to $114.
That’s pending any movements for Nvidia’s stock, which is extremely price sensitive for a company of its size.
Shares of Nvidia rose almost 4% Monday morning following the announcement of its next line of AI processors, trading within $20 of its all-time high set last week and pacing toward its sixth day of at least a 3% daily stock gain in May alone.
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Stock splits do not affect a company’s market capitalization or dilute the value of its shares, as the issuance of new shares is directly proportional. Historically, companies executed stock splits to make the purchase of its shares more accessible to investors, but it’s a more procedural move with today’s fractional trading, most directly assisting companies in awarding equity awards to its employees. Nvidia was the eighth company to announce a stock split this year, according to Bank of America research, and follows big technology peers Alphabet, Amazon and Tesla in splitting its shares over the last two years. Nvidia’s split comes after its share price exploded as investors flooded into the stock amid the generative AI explosion, as Nvidia is the primary seller of the semiconductor graphics processing units (GPUs) powering AI. Stocks tend to outperform the broader market following splits, returning 18% in the 12-month period after the move dating back to 2010, according to Bank of America, outstripping the S&P 500’s 13% gain.
Even after the 10-for-1 split, Nvidia’s stock will be more expensive than it was just four years ago, when it traded at $88 per share. Nvidia’s market value has skyrocketed from about $220 billion to $2.8 trillion over the four-year stretch, now trailing only Microsoft and Apple for the mantle of the world’s biggest company.
If Nvidia’s lower share price will lead to its inclusion in the Dow Jones Industrial Average. The Dow, one of the three most tracked American stock indexes, moves with its 30 constituents’ share prices, not market value, often leading it to exclude companies with pricier tickers. The Dow’s exclusion of Nvidia has contributed to its underperformance compared to the market cap-weighted S&P and Nasdaq, with the Dow’s 17% gain over the last 12 months trailing the S&P’s 25% and Nasdaq’s 27%.