Stock split fever is running rampant.
Walmart earlier this year infected some investors with the first stock split in more than two decades, which took place in February. Chipotle Mexican Grill Temperatures soared thanks to the 50-1 stock split announced in March.
But the biggest news of all came from Nvidia (NASDAQ: NVDA): The tech giant announced a 10-for-1 stock split in its first-quarter update on May 22. This split takes effect on June 7.
What should investors do when the clock is ticking? Forget Nvidia’s upcoming stock split. This is a much better reason to buy the stock.
Blackwell is coming
In March, Nvidia announced its most advanced AI product yet: Blackwell. This is not a new chip; it is a new architecture for GPUs. Nvidia says it is “the engine of the new industrial revolution” that will “power a new era of computing.”
Blackwell supports large language models (LLMs) with 1 trillion parameters. To put that into perspective, GPT-4 reportedly uses eight LLMs with 220 billion parameters each. Nvidia’s new platform enables training of generative AI models up to four times faster and up to 30 times faster inference than the H100 GPU. Blackwell also has total cost of ownership and energy consumption that are up to 25 times lower than the company’s Hopper GPU architecture.
All leading cloud service providers will use Blackwell: Amazon Web services, Alphabet‘s Google Cloud, Microsoft Azure, and Oracle Cloud. This also applies to Facebook parents MetaplatformsChatGPT creator OpenAI, Teslaand Elon Musk’s new AI company, xAI.
Nvidia CFO Colette Kress said in the company’s Q1 earnings call that demand for Blackwell “well exceeds supply.” CEO Jensen Huang revealed that production deliveries will begin in the second quarter of 2024 and accelerate in the third quarter. He said: “We will see a lot of Blackwell revenue this year.”
The bigger implication
I think Blackwell’s upcoming launch has a larger implication that shouldn’t be overlooked: Nvidia proves it can continue to outdo everyone.
Just when it looked like Nvidia might have some competition in the GPU market, the company upped the ante. Rivals like Advanced micro devices introduced new AI chips that might give Nvidia’s H100 GPUs a run for their money, but they don’t come close to the Blackwell platform.
TD Cowen analyst Matt Ramsay hit the nail on the head with his comments in Nvidia’s Q1 call. Ramsay told Huang, “Jensen, I’ve been in the data center industry my entire career. I’ve never seen the speed at which you’re introducing new platforms with the same combination of performance jumps that you’re getting.”
It seems like no other chipmaker or wannabe chipmaker in the world can keep up with Nvidia. Blackwell is proof. However, the new architecture is not the end of the story. In Huang’s response to Ramsay, he revealed: “[W]More Blackwells to come.”
What about the stock split?
Many investors may still be experiencing the Nvidia version of stock split fever. I admit that the company’s upcoming stock split could prompt some retail investors to buy shares at a lower price. However, any boost from the stock split will almost certainly only be temporary. Stock splits do not change a company’s underlying business or prospects.
Nvidia’s underlying business and prospects are impressive without a stock split. I have had some concerns about the stock’s valuation in the past. However, the level of growth the company is achieving and the pace of its innovation can go a long way to allaying these concerns.
I don’t care about Nvidia’s 10-for-1 stock split. But the feverish excitement over this high-flying stock is justified.
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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Keith Speights holds positions at Alphabet, Amazon, Meta Platforms and Microsoft. The Motley Fool holds positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Chipotle Mexican Grill, Meta Platforms, Microsoft, Nvidia, Oracle, Tesla and Walmart. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Forget Nvidia’s Stock Split: Here’s a Much Better Reason to Buy the Stock Originally published by The Motley Fool
