Nvidia stock (NVDA) began trading on a new 10-to-1 split basis on Monday. That means one share of the artificial intelligence giant went from Friday’s closing price of $1,208.88 to $120.88. The stock fell about 2% shortly after the opening bell.
Yahoo Finance’s Dan Howley and Josh Schafer report:
The split means that owners of Nvidia common stock they owned at market close on Thursday would receive 10 shares for every share they owned. For example, if a shareholder owned four shares of Nvidia as of Thursday, they will now own 40 shares after the split.
Stock splits make owning shares of a stock more affordable by lowering the price of individual shares without diluting the value of existing shareholders’ total holdings.
“The stock split will make Nvidia a lot more accessible to a lot of these retailers,” Matt Amberson of Option Research & Technology Services told Yahoo Finance last Thursday. “Now you rarely see a stock over $1,000 with 50% implied volatility, so option prices are extremely high, so options traders are really looking forward to the split.”
Nvidia’s split comes after the company’s total market valuation briefly surpassed $3 trillion on Wednesday, pushing the chip company past Apple to become the second most valuable publicly traded U.S. company.
Nvidia shares have skyrocketed thanks to the explosion of interest in generative AI that started when OpenAI debuted its ChatGPT software in late 2022. Since then, hyperscalers like Amazon (AMZN), Google (GOOG, GOOGL), and Microsoft (MSFT) have been fighting to get their hands on Nvidia’s hardware to power their own generative AI platforms.
Stock splits are seen by investors as a sign of strength, and as a result, companies that split their stock typically outperform the S&P 500 in the year following their announcement.
On average, stocks rise 25% in the 12 months following their split announcement, compared to the S&P 500’s average return of 12% in the same time frame, according to Bank of America analysis. This applies “across all market regimes,” BofA investment and ETF strategist Jared Woodard wrote in a note to clients.
The trend mainly covers the period from 2000 to 2009, amid the collapse of the technology bubble. Nvidia shares have risen about 27% since the company announced the split on May 22.
