What Does Nvidia’s Stock Split Mean for Investors?

Semiconductor firm Nvidia’s NVDA 10-for-1 stock split has been completed. After the market closed on Friday, June 7, investors received nine additional Nvidia shares for each one they owned as of the close of trading on Thursday. Shares began trading on a post-split basis on Monday, June 10.

“The split is reasonable since the stock price has appreciated so significantly,” says Morningstar technology equity strategist Brian Colello. The company announced the split along with its blowout first-quarter earnings results last month.

Nvidia shares are up more than 145% this year and more than 214% over the past 12 months, as the company has boomed thanks to the key role its semiconductor chips play in training and running artificial intelligence models. It now trades at over $1,200 per share, while it went for $495 at the end of 2023. The stock was changing hands near $305 per share in May 2023, just before the firm reported blowout earnings that kicked off the AI stock frenzy.

The firm’s last stock split was in July 2021, when it issued three new shares for every one outstanding (a four-for-one split).

In May, Colello raised his fair value estimate for Nvidia stock from a pre-split $910 to $1,050 following the company’s first-quarter results, which saw revenue of $26 billion—an 18% increase over the previous quarter and a 262% increase over the year-ago quarter.

What Nvidia’s Stock Split Means

While the split increases the number of outstanding shares in circulation, it does not change the company’s overall value or affect Morningstar’s view of its stock.

“Splitting the stock shouldn’t create economic value in theory, but it will make the company more accessible to smaller investors,” Colello explains. While $500 wasn’t enough to buy a single share of Nvidia last week, he explains, it’s now enough to buy several shares. After the split, Nvidia’s fair value estimate was adjusted to $105. The firm’s wide economic moat rating was unaffected, as was its 3-star rating (meaning the stock is considered fairly valued) and very high uncertainty rating.

Nvidia’s AI Boom

The firm’s first-quarter earnings show it “remains the clear winner in the race to build out generative artificial intelligence capabilities,” Colello writes. “We’re encouraged by management’s commentary that demand for its upcoming Blackwell products should exceed supply into calendar 2025, and we see no signs of AI demand slowing either.”

Colello is looking ahead to strong revenue growth from data centers over the next several quarters, and he expects additional growth from a higher installed base of AI equipment. He is anticipating revenue of $29.7 billion in the next quarter—slightly more than Nvidia’s estimate.

Colello doesn’t believe the rush of companies buying Nvidia’s chips will stall—for now, at least. He says the firm’s production is still well-matched to customer demand, though the risk bears watching. “Given Nvidia’s astronomical growth, we continue to assess the risk of companies buying too many AI GPUs too soon, leading to an air pocket and excess inventory at some point in the future. We see no such signs today,” he writes.

Why Do Companies Split Their Stock?

When a company splits its stock, each share gets divided into multiple new shares. While this increases the number of outstanding shares, it does not change the company’s overall value (its market capitalization). Firms tend to do this when their share price has risen dramatically to an amount that might make it difficult for individual investors to purchase them. Having a larger number of cheaper shares to attract more buyers can help improve liquidity, and lower prices can also have the psychological impact of making shares look more attractive to investors, even though the company’s underlying value hasn’t changed.

Other Recent Stock Splits

Nvidia isn’t the only major company that split its shares in recent years. Retail giant Walmart WMT enacted a three-for-one split in February, while Alphabet GOOGL/GOOG, Tesla TSLA, and Amazon AMZN split shares in 2022.