Nvidia (NVDA) shareholders have had a good run, watching their twice since 2022. NVDA’s skyrocketing stock price has done more than produce solid gains for shareholders and feelings of envy from everyone elseNew Delhi Wealth Management. It has left the entire investment community wondering, will Nvidia stock split again?
Let’s explore that question with a look at Nvidia’s split history, potential split catalysts, possible outcomes of a split and the likelihood that NVDA will split in 2024.
As of March 12, NVDA trades for about $900 per shareBangalore Wealth Management. The stock has been on an incredible run since the end of 2022, gaining nearly 500% in 14 months. Year to date in 2024, Nvidia is up 82%—and that’s after a 5.6% pullback on March 8. The performance flags Nvidia as one of the so far.
The force behind that momentum is Nvidia’s emergence as an early and profitable leader in artificial intelligence (AI). In its most recent earnings release, Nvidia reported 409% quarter-over-quarter sales growth for the Data Center division that handles its AI products. The growth drove quarterly Data Center revenue to $18.4 billion, which outpaced analysts’ lofty expectations.
Investors, thrilled to see large-scale monetization in AI, scooped up NVDA shares in the second half of February through early-March. There was a brief reversal on March 8, which was likely profit-taking. Investors may have also been spooked by a Citigroup analyst’s report noting that Nvidia’s market share had slipped slightly in certain categories.
Nvidia stock split history implies a split will come sooner rather than later. The company has split its stock five times since going public in 1999. You can see the details of those transactions in the table below.
Nvidia had been aggressive with its split strategy in the early 2000s—keeping the stock price below $100Lucknow Stock. After 2007, NVDA remained in the two-digit range until 2016. In December 2018, the stock took off, climbing from about $133 to nearly $800 per share by June 2021.
That run-up amounted to 470% total growth in roughly 30 months. That’s an impressive spike, but less so when compared to Nvidia’s most recent gain of nearly 500% in 14 months.
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Companies commonly split their stock to lower the share price. The thinking is that a lower share price makes the stock more attractive to a broader range of investors. That fosters a more dynamic trading environment and promotes the stock’s liquidity. Liquidity is attractive to investors because it means trade requests can be fulfilled quickly. This is particularly important to institutional investors that trade at scale.
Market sentiment and speculation become factors when investor optimism drives a stock price higher, to the point a split becomes a consideration.
Certainly, investors are excited about and Nvidia in particular. That excitement does translate to a higher stock price. But Nvidia has done its part, too. With profitable growth and a dominant market share in AI chips, the company is one of the best .
In other words, market sentiment in this case may expedite the need for a split, but it’s not the sole factor. Market sentiment will more likely play a bigger role after Nvidia announces a split is coming.
This is because split announcements generate buzz and buzz generates buys. Remember the last in 2022? The stock rose 8% after the split announcement, which was months ahead of the transaction. When Nvidia decides to split its stock, absent any bad news, investors will drive the stock price higher.
The factors that will more directly impact the timing of NVDA’s next split are share price, demand growth for AI and accessibility concerns for the stock.
NVDA’s price today is higher than it was the last time the stock split in 2021. Analyst price targets on NVDA range from $275 to $1,100, averaging out to a consensus of $829.66. A split is a possibility if the stock levels out to the low-$800s, but it becomes increasingly likely if NVDA stretches or more.
Nvidia has given investors a taste of AI-related gains. If the growth and profits story in Nvidia’s Data Center continues, investors will remain enthusiastic. That will keep the stock price high enough to warrant a split. If the AI outlook levels out or slows, investors won’t be forgiving. Many will move on to other growth stories.
The interesting thing is that a stock price reversal could also expedite a split. A bullish leadership team could decide to press on with a split to counter negative investment sentiment.
NVDA priced at $100 has more potential investors than NVDA priced at $800 or more. The $800 price point is only realistic for investors who buy fractional shares or those who invest at least $1,000 monthly.
For context, the average annual salary for adults in the U.S. is $4,948 monthly before taxes. That does not easily support a $1,000 investing budget.
If NVDA’s share price rises into the four digits, even fractional share purchases can become less appealing. Fractional brokers allow for trades with as little as $1. A $1 buy on a $1,000 stock equates to 0.001 shares. That sounds far less interesting and motivating than one-tenth of a share that’s priced at $100.
Nvidia’s leadership team has addressed the accessibility question in the past. In its 2021 split announcement, the company cited the need “to make stock ownership more accessible to investors and employees.”
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Mathematically, stock splits are non-events. They should not change a company’s value or a shareholder’s returns. The split only redistributes value across a different number of shares. A forward split increases the number of shares and reduces the stock price accordingly.
Still, splits can affect investor perception, which in turn affects the stock price. Let’s look at how that may work in the short and long-term for Nvidia.
A split announcement from Nvidia will be well-received by the investment community in the short term. Investors will interpret the news as added confirmation that Nvidia’s management team is optimistic. Investors will also assume a lower stock price will increase the pool of prospective shareholders. Those factors will push NVDA higher after the split announcement and in the days leading up to the split.
Longer term, an NVDA split in 2024 will have less importance. There is some research indicating that stocks generally outperform after a split, but Nvidia is something of a special case. Investors have already driven the price and the valuation quite high. They’re expecting results. If Nvidia doesn’t deliver, the stock price will fall. A split won’t prevent, delay or minimize that correction.
As it stands today, analysts expect Nvidia to produce 80% sales growth in this fiscal year 2025 and 20% in fiscal year 2026.
Based on Nvidia’s split history and its current price, a 2024 split is likely. Analyst Ken Mahoney, president and CEO of Mahoney Asset Management, agrees, although with a slightly longer timeline. Mahoney recently told that he predicts Nvidia will split within 12 months.
The split ratio will depend on how the stock performs over the next few months. If NVDA has another standout earnings release that drives the price higher, we could see a six-for-one exchange before year-end. That would give shareholders of record an extra five shares for each one they own on the split date.
With a high stock price, good momentum and an optimistic outlook, Nvidia is poised for a stock split in 2024. A split doesn’t change the stock’s potential for volatility, so do your research to ensure the move is right before you buy.
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