It has been a notable week for NVIDIA (NASDAQ:NVDA) and its shareholders. On Wednesday, the chipmaker’s market cap soared over the $3 trillion threshold, surpassing Apple (NASDAQ:AAPL) and making it the second-largest company within the U.S. behind only Microsoft (NASDAQ:MSFT).
Nevertheless, NVIDIA’s stock price dropped 1.2% on Thursday, falling back to around $2.98 trillion — roughly similar to Apple.
By the point the market closed on Thursday, NVIDIA’s 10-for-one stock split had gone into effect. Consequently, shareholders received nine additional shares for every share owned at Thursday’s closing bell.
NVIDIA’s stock split goes into effect
NVIDIA’s stock price fell just before the stock split went into effect, ending Thursday at $1,209.98. In other words, everyone who held not less than one share of NVIDIA received nine more for every share they owned as each share split into 10. That put the brand new stock price at about $121 per share.
Nevertheless, the brand new shares won’t be distributed until after the market closes on Friday. Then NVIDIA stock will start trading at the brand new price on Monday when the market opens at 9:30 a.m. Eastern.
At the moment, latest investors and existing shareholders trying to increase their positions can pile into the stock at a much lower entry price.
The split doesn’t change the intrinsic value of the stock in any way; it just changes the value. The thought is that a lower entry price will make it more accessible and attractive to a wider swath of investors who could also be priced out of paying $1,200 for a single share.
Second split for NVIDIA in three years
NVIDIA, which makes a speciality of AI-enabled semiconductor chips, has been the most popular stock available on the market in recent times. In 2023, the stock returned 239%, and this yr, it’s up one other 151%. Over the past five years, it has gone from $36 per share to $1,210, for a mean annualized return of 101.9%.
NVIDIA’s last stock split was on July 20, 2021, when it was trading at $751 per share. At the moment, the chipmaker initiated a four-for-one split, and the value got here right down to $187 per share. Since then, it has recorded an annualized return of about 90%.
Within the months after the split, NVIDIA stock soared to over $332 per share — until the unwinding began after the tech bubble burst, followed by the 2022 bear market. By October 2022, NVIDIA was right down to $109 per share. Investors who bought at that dip have seen the stock price increase 10 times over in lower than two years.
Other high-profile splits
NVIDIA is just the newest in a series of high-profile stock splits in recent times. In February, Walmart (NYSE:WMT) executed a three-for-one stock split and was trading at $59 per share, although that split did not move the needle much. Walmart stock is now as much as $67 per share.
In June 2022, Amazon (NASDAQ:AMZN) did a 20-for-1 split right down to $122 per share, and its shares fell immediately thereafter. Nevertheless, that was in the course of the bear market.
Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) also did a 20-for-one split right around the identical time in July 2022 to $111 per share. The stock moved up initially but was back below $90 per share by the tip of the yr.
It is tough to predict what NVIDIA will do, as the outcomes are different based on the corporate and the market environment. NVIDIA is an excellent company that’s firing on all cylinders at once, but its valuation may be very high, with a P/E ratio of around 70, so it can be interesting to see how the market reacts.
NVIDIA’s stock price was down by about 1.3% on Friday, so that may make the valuation barely more enticing for brand spanking new investors come Monday.