San Francisco, California – Nvidia shares saw a significant shift on Monday as the AI giant implemented a new 10-for-1 split, causing the price per share to drop from $1,208.88 to $120.88. Following the split, the stock experienced a 2% decline shortly after the market opened.
Investors who held Nvidia common stock as of Thursday’s market close received 10 shares for every one share they previously owned. This adjustment made owning shares of Nvidia more affordable by reducing the price of individual shares without affecting the total value of existing shareholders’ holdings.
According to Option Research & Technology Services’ Matt Amberson, the stock split can potentially attract more retail traders to Nvidia due to the decreased share price and volatility. The move comes after Nvidia briefly surpassed a $3 trillion market valuation, surpassing Apple to become the second most valuable publicly traded US company.
The surge in Nvidia’s shares can be attributed to the increased interest in generative AI, particularly following the introduction of OpenAI’s ChatGPT software in late 2022. Companies like Amazon, Google, and Microsoft have been vying for access to Nvidia’s hardware to power their own generative AI platforms.
Historically, stock splits have been viewed as a positive indicator of a company’s strength, with businesses that undergo splits typically outperforming the S&P 500 in the year following the announcement. Analysis from Bank of America shows that, on average, stocks experience a 25% increase in the 12 months following a split, outperforming the S&P 500’s average return of 12% during the same period.
Even during market downturns, the trend of stocks performing well post-split has remained consistent. Since Nvidia’s announcement of its split in May, the company’s shares have risen by approximately 27%. This trend showcases the impact of stock splits on investor sentiment and market performance.