Nvidia share price rallies to new record high ahead of Friday’s after-hours 10-to-1 stock split
Nvidia stock has been achieving record highs, exceeding a $3 trillion market cap, and thus surpassed Apple as the second-largest company in the US market.
What does the Nvidia’s Friday after-hours 10-to-1 stock split mean for investors?
The surge in the Nvidia share price to yet another record high comes as the company nears a significant 10-for-1 stock split on Friday. The split has drawn attention and is interpreted by investors as a move that could make the stock more accessible and potentially boost shareholder value. However, despite the anticipated benefits of the stock split, there are voices advising caution, citing reasons to avoid investing in what is currently one of Wall Street's hottest AI stocks. Meanwhile, it appears that several billionaires are loading up on Nvidia shares ahead of the split, indicating contrasting investor strategies and confidence in the stock’s future performance.
The current share price rally comes just before Nvidia’s stock will split 10-for-1 after Friday’s market close, a move announced on May 22 as part of its hugely positive quarterly earnings report, with shares trading at their new post-split price beginning next Monday.
It means Nvidia shareholders will receive nine additional shares for each share they owned prior to the split, which will cut the value of each share to a tenth of its prior value.
In effect the split will trim Nvidia’s share price from its almost $1,225 share price on Wednesday to around $122, making it a more affordable stock to buy for investors.
Stock splits do not change a company's total market value or the intrinsic value of its shares. The issuance of new shares is proportional, so while the share price decreases, shareholders own more shares to compensate.
Historically, splits made buying shares more affordable for small investors. Today, with fractional share trading, that's less important. Instead, splits now primarily help companies award equity to employees.
Nvidia is the eighth company this year to announce a split, per Bank of America. It follows other big tech names like Alphabet, Amazon, and Tesla in splitting shares recently amid high prices.
Splits are often followed by market outperformance. Bank of America found stocks tend to beat the S&P 500 by about 5 percentage points in the year post-split, since 2010.
Detractors might point, though, that with the so called ‘Magnificent seven’ stocks’ market cap reaching approximately $15 trillion, making up around a third of the S&P 500’s $45 trillion market cap, investing in these stocks at their current elevated levels might turn out to be a risky strategy.
Nvidia analyst ratings
LSEG Data & Analytics data shows a consensus analyst rating of ‘buy’ for Nvidia – 19 strong buy, 33 buy and 5 hold.
Nvidia share price – technical view
Since momentum begets momentum, the swift rally in the Nvidia share price is expected to continue with the $1,250 mark and possibly even the $1,300 level representing the next upside targets ahead of Friday’s after-hours stock split.
Minor support can be found at this week’s $1,174.68 to $1,166.00 price gap and also at the late-May $1,158.19 high.
Nvidia Daily Candlestick Chart
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