Aside from artificial intelligence (AI), companies that implement stock splits are the most popular on Wall Street.
A stock split allows a publicly traded company to cosmetically change its stock price and the number of shares outstanding without affecting its market capitalization or operating performance. In particular, investors have turned their attention to high-flying stocks with clear competitive advantages that drive forward stock splits and make their shares more affordable to ordinary investors.
Unraveling the history of Nvidia’s stock split
The latest high-profile stock to see a stock split is none other than AI titan Nvidia (NASDAQ: NVDA). The company’s recent 10-to-1 split wasn’t the first, however.
Since its initial public offering (IPO) in January 1999, Nvidia has undergone six forward splits:
If you owned one share of Nvidia stock at the IPO in January 1999, you would now own 480 shares after the last stock split. That’s an increase in market value from $12 at the IPO in 1999 to $62,870 in today’s value.
Are the world’s hottest AI stocks still worth buying?
Nvidia’s recipe for success is its in-demand H100 graphics processing units (GPUs), which are the standard in high-computing data centers. Nvidia’s four largest customers are all members of the ‘Magnificent Seven’.
With demand for AI GPUs far outpacing supply, the company has had no qualms about raising its prices and expanding its margins.
But becoming Wall Street’s latest stock split may not be enough to propel Nvidia’s stock higher. History has not been kind to the next big innovations. Investors have overestimated the adoption of any new technology for three decades, and AI is unlikely to break this trend.
Nvidia faces competition from within. America’s top customers are all developing their own AI-accelerating chips, which is a clear signal that America’s most influential companies are aiming to reduce their dependence on AI’s top dog.
The sledding will likely become more difficult for Nvidia in the future.
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Consider the following before buying shares in Nvidia:
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
If you bought 1 share of Stock-Split Stock Nvidia at the IPO, this is the number of shares you would own now. Originally published by The Motley Fool
