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The Rise of Nvidia: A Stock Split on the Horizon?

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Nvidia (NASDAQ: NVDA) has experienced a meteoric surge since the beginning of 2023, skyrocketing by approximately 500%. As a direct consequence of this monumental increase, the price for a single share in Nvidia is inching close to the $1,000 mark. This figure, seemingly just a neat round number, holds a significant psychological weight in the world of stocks. It serves as a key milestone that often prompts management teams to contemplate splitting their shares around this pivotal threshold. Notably, Nvidia’s leadership has previously opted for stock splits.

What are the chances of Nvidia gearing up for another split?

Indications Point to Yes

The effects of stock splits can be both tangible and symbolic. From a symbolic standpoint, it’s akin to slicing a pizza into smaller pieces. While investors with access to fractional shares can already divide Nvidia’s stock into as many segments as they desire (often down to one-thousandth of a share), this capability may not be universally available, especially to those outside the U.S. Consequently, the potential for a Nvidia stock split can indeed have substantial repercussions, making the stock more accessible to a broader range of investors. For instance, if you only have $100 to invest, a stock priced at $1,000 per share may seem out of reach, even with fractional shares offered by your preferred brokerage.

So, is Nvidia poised for a split? History seems to suggest so.

Nvidia has executed five stock splits since its market debut. The most recent was in 2021, where it underwent a 4-for-1 split, trading at a pre-split price of approximately $744, lower than its current valuation. Prior to that, the last split occurred in 2007, reflecting a split-adjusted price just above $50. Stock splits were more prevalent back then, potentially making instances predating the 2021 event less predictive in 2024.

Given that the stock price has now surpassed pre-2021 split levels, signs point towards Nvidia likely initiating another stock split.

Timing the Announcement

After Nvidia disclosed its stock split plans on May 21, 2021, the stock witnessed a robust surge until the split’s execution on July 20, peaking at a nearly 40% increase.

NVDA Chart

NVDA data by YCharts.

This historical timeline indicates a similar scenario could unfold in 2024, aligned with Nvidia’s annual meeting scheduled for June. Therefore, if you anticipate a stock split announcement, monitor Nvidia’s Q1 FY 2025 results anticipated for late May.

Is the current moment ideal for purchasing Nvidia stock in anticipation of a surge triggered by stock split frenzy? That’s doubtful. The prudent reason to invest in a stock lies in the value of the underlying business. In Nvidia’s case, the answer undeniably leans towards a β€œyes,” given the robust demand for its graphics processing units (GPUs) due to the burgeoning interest in artificial intelligence (AI) computing.

Nvidia has consistently reported phenomenal revenue growth figures. Its recent performance in Q4 FY 2024, ending on January 28, exhibited a 265% surge in revenue to $22.1 billion, with a projected additional 234% rise to $24 billion in Q1 FY 2025.

This signals a formidable business trajectory. With sustained impressive results, Nvidia is likely to proceed with a stock split. While market activity surrounding this news may influence stock movement, it’s vital to retain focus on the bigger picture: Nvidia stands as one of the prominent beneficiaries of the ongoing AI evolution.

Is Investing $1,000 in Nvidia Currently Advisable?

Prior to delving into Nvidia shares, contemplate the following:

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Keithen Drury declares no positions in any of the stocks mentioned. The Motley Fool holds positions in and endorses Nvidia. The Motley Fool maintains a disclosure policy.

The opinions articulated here belong solely to the author and may not necessarily align with those of Nasdaq, Inc.

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