Insights

Don’t be fooled by Nvidia stock split speculation

By Paul Reid

01 March 2024

Nvidia office

There is a lot of speculation within the financial world as to whether Nvidia will announce a coming stock split. Is it likely to happen and how might the price react? Let’s unpack Nvidia and see if there is some truth behind the stock split hype.

Will Nvidia stock split this year?

First of all, as of 29 February 2024, there is no official announcement from Nvidia regarding a potential stock split. Headline hypes are circulating because Nvidia has a history of stock splits. The last one occurred at $751 on July 19, 2021.

Splitting is said to make shares accessible to more retail investors, as the lower share price can entice those who might not be able to afford whole shares at the pre-split price. That’s the official line that everyone is using, but it’s not the most convincing of explanations.

Do you think NVIDIA Corp, a $2.1T market cap company would split its shares so people who can’t afford to invest $780 will instead be able to buy a fraction of an NVDA share?

But this doesn’t mean you should avoid trading NVDA. Nvidia is at the forefront of the AI evolution and the future looks brighter than ever for the California-based company. Moreover, there are plenty of other reasons for Nvidia to split NVDA. Even the current fragility of the economy supports an Nvidia stock split.

So, yes, while the current split hype is unfounded, it might still come true. So what if it does?

How an Nvidia stock split might affect the price

While a stock split can be an exciting or volatile time for traders, keep in mind that the stock split itself does not change the underlying value of the company. A stock split simply increases the number of shares in existence, and reduces the value per share accordingly.

Nvidia is trading at an all-time high right now, but traders typically aim to buy when low and sell when high. A stock split might create the illusion of a buyer’s market, but in reality, the company's financial health, competitive landscape, management team, and prospects haven’t changed at all.

So, if you believe NVDA is currently over-priced or overbought, then a 4-for-1 split stock valued at $195 is still an overbought asset. Seeing NVDA for less than $200 per share might sound interesting to some traders, but in reality, it’s still priced high.

Any bullish market reactions to rumors or even announcements of a stock split are purely emotional or sentimental reactions from market participants and whatever rallies or crashes occur are commonly short-lived and corrected soon after. Don’t be fooled by stock split speculation and evaluate the company and what has changed.

Conclusion

While a stock split can generate short-term excitement and trading activity, don't let it cloud your judgment. Focus on due diligence and fundamental analysis to make informed investment decisions.

Nvidia has a bright future in the booming tech sector, especially considering its strong position in artificial intelligence and gaming, so continued growth is not unexpected. Growth is also not guaranteed, as the global economy can have unforeseeable consequences that can rattle even the strongest bulls.

If ever you are unsure about an entry point, remember the ‘buy low, sell high’ mantra uttered by generations of traders, and then ask yourself, is NVDA priced low or high right now?


This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.


Author:

Paul Reid
Paul Reid

Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.