After a market capitalization surge of over $1 trillion, analysts believe NVIDIA may consider another stock split in the future.
NVIDIA announced a 1-for-4 stock split back in May 2021 when its stock price was around $600, much lower than the current nearly $1000. The reason for NVIDIA's stock split in 2021 was to make it easier for investors and employees to own shares. Analysts suggest that if NVIDIA can continue its growth trajectory and stay on an upward trend, a stock split in the next one or two years would be reasonable.
During the Friday session of the US stock market, NVIDIA surged more than 5% in early trading, reaching a historic high of $974. However, without any significant news, the stock quickly reversed course and dropped by about 5%, falling below the $880 mark at one point. The retreat of NVIDIA's high position also dragged down chip stocks in general, with TSMC's gains narrowing from about 6% to less than 2%, Marvell Tech falling by 8.7%, and Broadcom dropping by around 4.4%.
Amid the AI boom, NVIDIA's stock price has been soaring, adding over $1 trillion in market value in just over two months since the beginning of this year, far exceeding its level at the last stock split. Some believe that NVIDIA may split its stock again.
Ken Mahoney, President and CEO of Mahoney Asset Management, said, "In the next year or two, I expect NVIDIA may split its stock again. If NVIDIA can continue to grow and stay on an upward trajectory, a stock split would be reasonable. It would allow some retail investors to buy shares they currently see as out of reach."
NVIDIA last announced a 1-for-4 stock split in May 2021 when its stock price was around $600, much lower than the current nearly $1000. The reason for NVIDIA's stock split in 2021 was to make it easier for investors and employees to own shares. On July 19, the day before trading at the adjusted post-split price began, NVIDIA's stock price had already risen to around $750 per share.
While NVIDIA bulls believe that based on its future profit growth, the valuation is still relatively cheap, some potential investors may hesitate due to the high stock price.
Stock splits are usually symbolic measures aimed at attracting smaller investors and do not change any company's fundamentals or valuation. Some industry insiders have stated, "On one hand, stock splits are insignificant because they do not change the company's value; but on the other hand, retail investors psychologically prefer to buy shares priced in tens of dollars rather than hundreds of dollars, thinking it's cheaper, even though it's not actually cheaper."
It is important to note that as of now, NVIDIA has not made any statements regarding a stock split, and its stock price continues to rise, seemingly not deterring any retail investors. It, along with Tesla, AMD, and AMD, are among the most commonly traded stocks by retail investors. Additionally, retail investors who like NVIDIA but find the stock price expensive can also purchase fractional shares.
Last year, none of the companies in the Nasdaq 100 index underwent a stock split. This is in stark contrast to the situation during the early days of the COVID-19 pandemic, when the surge in tech stocks led some large companies to split their stocks. For example, both Apple and Tesla conducted stock splits in 2020, with Tesla undergoing two splits. Amazon and Google's parent company Alphabet also carried out stock splits in 2022.