Nvidia 10-for-1 stock split: What investors need to know (2024)

  • Nvidia stock has gained 540% since early last year, driven by triple-digit revenue and profit growth resulting from surging demand for AI.
  • The company announced plans to split its stock for the first time since July 2020.
  • Nvidia stock is a buy, but investors shouldn't buy shares for the pending stock split.

Recent developments in the field of artificial intelligence (AI) have captured the public imagination over the past year or so. One of the byproducts of this trend has been the surging stock prices of companies at the forefront of this paradigm shift in technology. Nowhere is this more apparent than with chipmaker Nvidia (NASDAQ: NVDA), whose graphics processing units (GPUs) have become the gold standard for AI.

The company's consistent execution and unrivaled business performance have fueled its meteoric ascent. Nvidia stock has gained 540% since early last year, driven by triple-digit revenue and profit growth resulting from surging demand for AI. Yet that's just the beginning. Since Nvidia's IPO in early 1999, the stock has soared from a split-adjusted price of $0.25 to more than $939, representing eye-popping gains of 375,500%.

On Wednesday, in conjunction with the release of the company's quarterly results, Nvidia announced plans to split its stock for the first time since July 2020. The stock has gained more than 800% in the nearly four years since, which is likely the catalyst for the split. This revelation is sparking a fresh wave of interest in an already well-followed stock. Let's review the mechanics of a stock split and what it means for investors.

Nvidia 10-for-1 stock split: What investors need to know (1)

The stock-split details

Nvidia announced that its board of directors had approved a 10-for-1 forward stock split. This will result from an amendment to the company's Restated Certificate of Incorporation, which Nvidia says "will result in a proportionate increase of the number of shares of authorized common stock."

As a result of this split, shareholders of record as of June 6, 2024, will receive nine additional shares of stock for each share they own after the market close on Friday, June 7. The stock is expected to begin trading on a split-adjusted basis on June 10.

Nvidia investors won't need to take any steps in order to receive the additional shares of stock. Brokerage firms and investment banks handle the particulars, with the adjustments being handled behind the scenes. The stock-split shares will simply appear in investor accounts with no further action necessary. The timing can vary from brokerage to brokerage, so investors shouldn't worry if the newly issued shares aren't there immediately on June 7, as it can take hours, or in some cases days, for the additional shares to make an appearance.

Adding numbers can provide context regarding how the stock-split process plays out. For each share of Nvidia stock a shareholder owns -- it's currently trading for roughly $950 per share (as of this writing) -- post-split, investors will hold 10 shares worth $95 each.

Is a stock split a good thing?

As the above example shows, the total value of ownership won't change based on the split alone; it's merely a different way of viewing the whole. Put another way, if you buy a pizza, it doesn't matter if you cut it into eight slices or 16 slices -- the total amount of pizza remains the same. By the same token, Nvidia stockholders will simply have a greater number of lower-priced shares.

There are those who believe that investor psychology will ultimately play a part, with excitement about the upcoming stock split driving up the share price. It's also been suggested that the lower share price can increase demand for those shares among retail investors. Indeed, management notes in the announcement that the purpose of the split is to "make stock ownership more accessible to employees and investors." While that's frequently the case, that kind of temporary euphoria historically subsides, leaving investors to focus on what matters -- the company's operational and financial performance -- which will ultimately drive the stock price higher or lower.

Is Nvidia stock a buy?

While the stock split alone isn't reason enough to buy Nvidia, there are plenty of reasons the semiconductor specialist is a buy. Investors need to look no further than the company's financial report for evidence to support that contention.

In its fiscal 2025 first quarter (ended April 28), Nvidia reported revenue that soared 262% year over year to a record $26 billion, marking an 18% quarter-over-quarter increase. This drove adjusted earnings per share (EPS) up 461% to $6.12.

For context, analysts' consensus estimates were calling for revenue of $24.65 billion and EPS of $5.59, so Nvidia sailed past expectations with ease.

If there was any doubt, robust demand for generative AI fueled record data center revenue of $22.6 billion, up 427% year over year and representing 87% of Nvidia's total sales.

Another important announcement for shareholders is that Nvidia increased its quarterly dividend by 150%, from $0.04 to $0.10 per share, or $0.01 on a post-split basis. The first increased dividend payment will be made on June 28. Even at the new, higher level, the yield will still be paltry, amounting to just four-tenths of 1%.

It's still very early in the AI revolution, which is even more reason to be optimistic. The worldwide AI market clocked in at $2.4 trillion in 2023 and is expected to rise to $30.1 trillion -- a compound annual growth rate of 32% -- by 2032, according to Expert Market Research. As the gold standard for GPUs used in AI, Nvidia is well positioned for future success.

Investors shouldn't buy shares for the pending stock split. However, Nvidia's long track record of consistently strong operating and financial results -- and blistering stock price gains -- show why it continues to be such a winning investment.

Some investors will balk at Nvidia's valuation, but you get what you pay for. Despite four consecutive quarters of triple-digit revenue and EPS growth, Nvidia stock is selling for 37 times forward earnings. That's a small price to pay for such robust growth.

That's why Nvidia stock is a buy.

Danny Vena has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

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Nvidia 10-for-1 stock split: What investors need to know (2024)

FAQs

Nvidia 10-for-1 stock split: What investors need to know? ›

On that day, the stock's price will be split, or divided, by 10. That means the price will convert to a tenth, or 10%, of the current value, and existing shareholders will receive ten shares for every one share owned.

What will Nvidia's 10-for-1 stock split mean for investors? ›

Nvidia plans a "10-for-1" split, so shareholders will get nine new shares for every share they already own. The economic value of their holdings won't change, so they will still be entitled to the same overall dividend payouts, and still have the same voting rights.

What does Nvidia 10 to 1 split mean? ›

Nvidia's 10:1 stock split will increase the total outstanding shares of Nvidia common stocks by ten times while cutting the cost of each share proportionately without affecting the value of investors' holdings.

Should you buy Nvidia before or after the split? ›

Stock splits are mostly cosmetic actions and only have consequences if investors cannot access fractional shares or trade options. There are far better reasons to buy Nvidia stock than a split announcement. If you buy now and the stock sees a huge rise due to the announcement, you'll benefit in the short term.

Is a 10 to 1 stock split good? ›

Here are 8 expensive stocks that could get a boost by following Nvidia's 10-for-1 move. Nvidia is the 8th company this year to announce a forward stock split. Stock splits have no impact on the market value of a company, but they are historically bullish, according to Bank of America.

Is the Nvidia stock split good? ›

The stock split means investors will receive nine additional shares for each one they already own. “The split is reasonable since the stock price has appreciated so significantly,” says Morningstar technology equity strategist Brian Colello.

What happens to investors when a stock splits? ›

A stock split lowers its stock price but doesn't weaken its value to current shareholders. It increases the number of shares and might entice would-be buyers to make a purchase. The total value of the stock shares remains unchanged because you still own the same value of shares, even if the number of shares increases.

Do stocks usually go up after a stock split? ›

That said, markets perceive a stock split as a positive, and usually, we'll see a stock go higher on the announcement of a stock split. In a market where sentiments play a part in price action right alongside fundamentals, stock splits are a smart strategy for companies to adopt.

What is the point of a 2 for 1 stock split? ›

The most common split ratios are 2-for-1 or 3-for-1, which means every single share before the split will turn into multiple shares after the split. A company elects to perform a stock split to intentionally lower the price of a single share, making the company's stock more affordable without losing value.

What does stock split ratio 1 10 mean? ›

Let us assume that this ratio is 10:1 (or 10-for-1). The 10:1 stock split meaning is fairly intuitive; it implies that for every one share held, shareholders get ten shares (post-split).

Is it wise to buy a stock after it splits? ›

Splits are generally a positive announcement, with the lower share price helping boost share liquidity. And while both Celsius CELH and Novo Nordisk NVO shares have delivered market-beating returns post-split, strictly buying post-split is not a feasible strategy.

What price was Nvidia stock when it split? ›

Nvidia shares closed on Wednesday at $949.50. With a 10-for-1 split based on that price, each share would cost $94.95, though an investor would have to buy 10 of them to own the same amount of the company as they currently get with one share. Alphabet , Amazon and Tesla all orchestrated stock splits in 2022.

Does Nvidia do pre orders? ›

Pre-order is now AVALIABLE on NVIDIA website.

Is 10% in one stock too much? ›

Concentrated stock positions can increase the market risk in your portfolio. A concentrated position represents any holding worth at least 5% to 10% of your overall portfolio. Addressing a concentrated position requires planning to avoid tax implications and other issues.

What happens when a stock splits 10 to 2? ›

When a stock with a face value of ₹10 undergoes a 2:1 stock split, the face value of the stock reduces from ₹10 to ₹5. This results in doubling the number of shares owned, but the total investment value remains constant at ₹10.

What is a good investment split? ›

Many financial advisors recommend a 60/40 asset allocation between stocks and fixed income to take advantage of growth while keeping up your defenses.

Should you invest when a stock splits? ›

First let's make clear that stock splits aren't nearly as important for retail investors as they were back in the days before folks could open a smartphone app and buy fractional shares for free. Nvidia is splitting its stock for pretty much the same reason Walmart split its stock, which was more for its own employees.

Do stock splits affect the total number of shares you own as an investor? ›

A stock split increases the number of outstanding shares and therefore increases the liquidity of the shares. However, the total amount of the shares stays the same, since the split does not change the stock's valuation.

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