Nvidia shares (NVDA) began trading Monday with a 1-for-10 stock split, meaning the artificial intelligence giant’s shares rose to $120.88 from Friday’s closing price of $1,208.88. The stock fell about 2% in early trading.
Yahoo Finance’s Dan Howley and Josh Schafer report:
The split means that holders of Nvidia common stock held as of Thursday’s market close will receive 10 shares for each share they held. For example, a shareholder who held four Nvidia shares as of Thursday would own 40 shares after the split.
Stock splits make stock more affordable to own by lowering the price of individual shares without diluting the overall value of existing shareholders’ holdings.
“A stock split would make Nvidia more affordable for many retail investors,” Matt Amberson of Options Research & Technology Services told Yahoo Finance last Thursday. “Right now, it’s rare to see a stock with a price above $1,000 and 50% implied volatility, so options prices are sky-high and options traders are eagerly awaiting a stock split.”
Nvidia’s stock split comes after the company’s market capitalization briefly exceeded $3 trillion on Wednesday, overtaking Apple to become the second-most valuable publicly traded company in the United States.
Nvidia’s shares have soared due to an explosion of interest in generative AI since OpenAI launched its ChatGPT software in late 2022. Since then, hyperscalers such as Amazon (AMZN), Google (GOOG, GOOGL) and Microsoft (MSFT) have been racing to get their hands on Nvidia hardware to power their own generative AI platforms.
Stock splits are viewed by investors as a sign of strength, and as a result, companies that split their stock typically outperform the S&P 500 in the year following the announcement.
According to Bank of America analysis, stock prices rise 25% on average in the 12 months following a stock split announcement, compared with the average return of the S&P 500 index over that same period of 12%. This holds true “across market conditions,” Jared Woodard, investment and ETF strategist at Bank of America, wrote in a client note.
Notably, this trend includes the period during the collapse of the tech bubble from 2000 to 2009. Nvidia shares have risen about 27% since the company announced its stock split on May 22.
