Nvidia shares just hit their highest price ever, but they are about to get a whole lot cheaper, and, no, that's not some bold prognostication for the world’s hottest stock: the artificial intelligence semiconductor chip designer is on the cusp of executing a stock split last month.
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Stock splits do not affect a company’s market capitalization or dilute the value of its shares, as the issuance of new shares is directly proportional. Historically, companies executed stock splits to make the purchase of its shares more accessible to investors, it’s a more procedural move with today’s fractional trading, most directly assisting companies in awarding equity awards to its employeesAhmedabad Stock. Nvidia was the eighth company to announce a stock split this year, according to Bank of America research, and follows big technology peers Alphabet, Amazon and Tesla in splitting its shares over the last two years. Nvidia’s split comes after its share price exploded as investors flooded into the stock amid the generative AI explosion, as Nvidia is the primary seller of the semiconductor graphics processing units (GPUs) powering AI. Stocks tend to outperform the broader market following splits, returning 18% in the 12-month period after the move dating back to 2010, according to Bank of America, outstripping the S&P 500’s 13% gain.
Even after the 10-for-1 split, Nvidia’s stock will be more expensive than it was just four years ago, when it traded at $88 per share. Nvidia’s market value has skyrocketed from about $220 billion to almost $3 trillion over the four-year stretch, now trailing only Microsoft and Apple for the mantle of the world’s biggest company.
If Nvidia’s lower share price will lead to its in the Dow Jones Industrial AverageJaipur Wealth Management. The Dow, one of the three most tracked American stock indexes, moves with its 30 constituents’ share prices, not market value, often leading it to exclude companies with pricier tickers. The Dow’s exclusion of Nvidia has contributed to its underperformance compared to the market cap-weighted S&P and Nasdaq, with the Dow’s 17% gain over the last 12 months trailing the S&P’s 25% and Nasdaq’s 27%.
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