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Big Week for NVIDIA Shareholders as Stock Split Kicks In

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It has been a notable week for NVIDIA (NASDAQ:NVDA) and its shareholders. On Wednesday, the chipmaker’s market cap soared over the $3 trillion threshold, surpassing Apple (NASDAQ:AAPL) and making it the second-largest company in the U.S. behind only Microsoft (NASDAQ:MSFT).

However, NVIDIA’s stock price dropped 1.2% on Thursday, falling back to around $2.98 trillion — roughly the same as Apple.

By the time the market closed on Thursday, NVIDIA’s 10-for-one stock split had gone into effect. As a result, shareholders received nine additional shares for each share owned at Thursday’s closing bell.

NVIDIA’s stock split goes into effect

NVIDIA’s stock price fell just before the stock split went into effect, ending Thursday at $1,209.98. In other words, everyone who held at least one share of NVIDIA received nine more for each share they owned as each share split into 10. That put the new stock price at about $121 per share.

However, the new shares won’t be distributed until after the market closes on Friday. Then NVIDIA stock will start trading at the new price on Monday when the market opens at 9:30 a.m. Eastern.

At that time, new investors and existing shareholders looking to increase their positions can pile into the stock at a much lower entry price.

The split doesn’t change the intrinsic value of the stock in any way; it just changes the price. The idea is that a lower entry price will make it more accessible and attractive to a wider swath of investors who may be priced out of paying $1,200 for a single share.

Second split for NVIDIA in three years

NVIDIA, which specializes in AI-enabled semiconductor chips, has been the hottest stock on the market in recent years. In 2023, the stock returned 239%, and this year, it is up another 151%. Over the past five years, it has gone from $36 per share to $1,210, for an average annualized return of 101.9%.

NVIDIA’s last stock split was on July 20, 2021, when it was trading at $751 per share. At that time, the chipmaker initiated a four-for-one split, and the price came down to $187 per share. Since then, it has recorded an annualized return of about 90%.

In the months after the split, NVIDIA stock soared to over $332 per share — until the unwinding began after the tech bubble burst, followed by the 2022 bear market. By October 2022, NVIDIA was down to $109 per share. Investors who bought at that dip have seen the stock price increase 10 times over in less than two years.

Other high-profile splits

NVIDIA is just the latest in a series of high-profile stock splits in recent years. In February, Walmart (NYSE:WMT) executed a three-for-one stock split and was trading at $59 per share, although that split failed to move the needle much. Walmart stock is now up to $67 per share.

In June 2022, Amazon (NASDAQ:AMZN) did a 20-for-1 split down to $122 per share, and its shares fell immediately thereafter. However, that was in the middle of the bear market.

Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) also did a 20-for-one split right around the same time in July 2022 to $111 per share. The stock moved up initially but was back below $90 per share by the end of the year.

It is hard to predict what NVIDIA will do, as the results are different based on the company and the market environment. NVIDIA is a great company that is firing on all cylinders right now, but its valuation is very high, with a P/E ratio of around 70, so it will be interesting to see how the market reacts.

NVIDIA’s stock price was down by about 1.3% on Friday, so that might make the valuation slightly more enticing for new investors come Monday.