Nvidia‘S (NASDAQ: NVDA) the recent stock split was perhaps one of the most anticipated events on investors’ financial calendars. On June 7, the company completed its 10-for-1 stock split, and the shares will begin trading at the split-adjusted price on Monday, June 10. A stock split involves issuing more shares to current holders to lower the price of shares. a share that has reached a high level. This does not change the overall market value of a company or the valuation of a share, but only the price per share.
Because stock splits are purely mechanical, they are not a reason for you to buy or sell a particular stock – and that means they are not known to lead to price gains or declines. Still, it’s interesting to look at a stock’s price movement after a split, and now is the perfect time to look back at Nvidia’s performance after the past few splits.
Does history offer us any clues as to how Nvidia stock might perform in the coming months? Let’s find out.
Nvidia’s past three stock splits
Prior to last week’s operation, Nvidia had conducted a total of five stock splits over time, but we’ll only consider the past three. These took place in July 2021, September 2007 and April 2006.
In the two previous periods, the stock fell immediately after the split, but rose again in the following months. However, after the 2007 split, Nvidia shares fell from their post-split highs and remained lower for some time.
NVDA data by YCharts
After the next stock split, in 2021, the shares followed a similar pattern – but started gaining momentum about a year later.
And by 2023, they rose even further, buoyed by optimism about artificial intelligence (AI) revenues.
What does this tell us about what could happen to Nvidia stock in the coming months? It’s important to remember that Nvidia was a very different company a few years ago, with its powerful chips generating most of their revenue in the gaming industry.
In recent years, sales of Nvidia’s graphics processing units (GPUs) to customers in the AI ​​space have skyrocketed, and that business has soared beyond the gaming sector. For example, in the most recent quarter, gaming revenue was $2.6 billion, while data center revenue was $22 billion.
A difficult comparison
This means it’s difficult to compare Nvidia’s stock performance in the days before the AI ​​boom to today’s stock performance. Of the charts, however, the one from 2021 is the most relevant, as Nvidia saw rising revenues in its data center business around this time. For example, in the first quarter of 2021, data center revenues already increased by double digits.
But here’s the most important element to note: the progressive gains we saw in the years following the 2021 stock split were not a result of the stock split itself. Instead, Nvidia’s impressive revenue growth and investor optimism about its future in AI boosted performance.
And now, looking ahead, this same element could continue to boost Nvidia stock. After all, we’re still in the early days of AI development, which suggests more and more companies will sign up for Nvidia’s products and services.
As we can see from the charts above, Nvidia’s previous stock splits have not produced a clear pattern that may be repeated. Yes, the stock fell after the split and then rose, but these moves were most likely caused by investors holding onto their gains or switching from Nvidia for fundamental reasons. The stock splits themselves provided no direction for the stock.
Today, this confirms that the latest stock split will not serve as a catalyst for stock performance. If Nvidia’s stock rises, falls or stagnates in the coming weeks or months, we can attribute the move to news about its earnings outlook, not the stock split.
All this means that the best way to predict Nvidia’s future stock performance is to keep a close eye on the company’s next moves – to see if it can stay ahead of rivals and dominate in the fast-growing AI market.
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Adria Cimino has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Here’s What Happened After Nvidia’s Last Three Stock Splits (and What That Means for the Stock Today) was originally published by The Motley Fool
