Money attracts money. It is therefore not surprising that some of the richest investors in the world own positions in Nvidia (NASDAQ: NVDA). The company is making money hand over fist thanks to skyrocketing demand for its artificial intelligence (AI) chips.
Nvidia will execute a 10-for-1 stock split after the close of trading on Friday, so its shares will trade at a much lower price on Monday. Are billionaire investors busy buying Nvidia stock ahead of the impending stock split?
Don’t count on it
The truth is, we don’t know for sure if billionaires are snapping up shares of Nvidia. The latest round of disclosures by regulators – revealing their holdings from the end of the first quarter of 2024 – took place a few weeks ago. Unless one or more billionaire investors publicly mention that they recently bought Nvidia, it will likely be a few more months before we find out whether they have increased their stakes in the GPU (graphics processing unit) maker.
Based on their first quarter activity, you probably shouldn’t count on billionaires buying Nvidia before the stock split. Several super-rich investors have significantly reduced their holdings in the first three months of the year.
For example, Citadel founder Ken Griffin cut his hedge fund’s position in Nvidia by nearly 68% in the first quarter. David Tepper sold 44% of Appaloosa’s shares in Nvidia last quarter. Stanley Druckenmiler reduced his Duquesne Family Office’s stake in Nvidia by 71.5%.
These investors fully understand that Nvidia’s stock split does not change the fundamentals of its business in any way. Splitting the stock is the equivalent of re-cutting an eight-piece pizza to make 16 pieces. There is still the same amount of pizza with the same toppings, just the slices are smaller.
Furthermore, billionaires know that the widespread availability of fractional share trading has changed the impact of stock splits. With many brokers allowing their clients to buy and sell fractional shares, most investors looking to add Nvidia to their portfolios have been able to do so regardless of its sky-high stock price.
A final perhaps
Still, I think there’s a good chance that some billionaire investors could buy Nvidia ahead of the stock split. They might consider that stock splits of widely followed stocks like Nvidia will still have a psychological impact on retail investors, despite the advent of fractional share trading.
Perhaps a bigger consequence of Nvidia’s stock split, however, is that its shares could be added to the stock Dow Jones Industrial Average in the near future. The main factor that kept Nvidia from being added to the Dow Jones was its high stock price. It wouldn’t be surprising if a few billionaires increased their hedge funds’ stakes in Nvidia in anticipation of exchange-traded funds (ETFs) and mutual funds that track the Dow and buy Nvidia if it is included in the index.
I suspect ultra-wealthy investors might also be buying Nvidia right now for reasons unrelated to the upcoming stock split. The company announced spectacular Q1 results two weeks ago. That quarterly update could have prompted some billionaires who had cut their positions in the stock to start buying again.
In particular, Nvidia’s optimism about demand for the upcoming Blackwell platform could have lured wealthy investors back into the fold. Blackwell will be the company’s most powerful architecture for AI chips yet.
Should you Loading Nvidia shares?
Does it matter what billionaire investors do regarding Nvidia? Not really. The most important question is: should you Loading Nvidia shares? The answer to this question depends on your investing style.
Income investors will almost certainly want to look elsewhere. Although Nvidia pays a dividend, its forward yield is a minuscule 0.0035%.
Risk-averse investors can also find other stocks more to their liking. Nvidia is priced higher based on certain valuation metrics due to its enormous growth prospects. However, much of that expected growth is already anchored in the share price. If this doesn’t happen, the stock could plummet.
However, Nvidia should be a good choice for growth investors willing to take some risk. Perhaps the looming stock split will provide a major catalyst; maybe not. Regardless, Nvidia’s continued innovation should keep the company at the forefront of the AI chip market.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Are billionaires into Nvidia before the 10-for-1 stock split? was originally published by The Motley Fool
