Big week for NVIDIA shareholders as stock split begins

This has been a notable week for NVIDIA (NASDAQ:NVDA) and its shareholders. On Wednesday, the chipmaker’s market capitalization surpassed $3 trillion, surpassing Apple (NASDAQ:AAPL) to become the second-largest company in the U.S. behind Microsoft (NASDAQ:MSFT).

But Nvidia’s shares fell 1.2% on Thursday to $2.98 trillion, about the same as Apple’s.

As markets closed on Thursday, NVIDIA’s 10-for-1 stock split went into effect. As a result, shareholders received nine additional shares for each share they owned at the close of business on Thursday.

NVIDIA’s stock split goes into effect

NVIDIA’s stock price fell shortly before the stock split took effect, closing at $1,209.98 on Thursday. This means that anyone who holds at least one share of NVIDIA stock received nine more shares for each share they own, as each stock was split into 10 shares. That means the new stock price will be approximately $121 per share.

However, the new shares will not be distributed until the markets close on Friday. NVIDIA stock will then begin trading at the new price on Monday when the market opens at 9:30 a.m. ET.

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

The split does not change the intrinsic value of the stock in any way. Just the price changes. The idea is that the lower entry price will make it more accessible and attractive to more investors who can afford to pay $1,200 per share.

NVIDIA’s second spin-off in three years

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

NVIDIA’s last stock split was on July 20, 2021, when it traded at $751 per share. At that time, the chipmaker initiated a 4-for-1 split and the price fell to $187 per share. Since then, it has recorded an average annual return of about 90%.

In the months following the split, NVIDIA stock soared to more than $332 per share. That is until the unwinding begins after the tech bubble bursts and a bear market ensues in 2022. By October 2022, NVIDIA had fallen to $109 per share. Investors who bought during a bear market have seen stock prices rise more than tenfold in less than two years.

Other Notable Splits

NVIDIA is the latest in a series of notable stock splits in recent years. Last February, Walmart (NYSE:WMT) implemented a 3-for-1 stock split and was trading at $59 per share, but the split failed to make much of a difference. Walmart stock is currently up to $67 per share.

In June 2022, Amazon (NASDAQ:AMZN) split 1-for-20, reducing the stock to $122 per share and its stock price falling shortly thereafter. But that was in the middle of a bear market.

Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) also conducted a 20-share split around the same time in July 2022 at $111 per share. The stock initially rose, but fell below $90 per share by the end of the year.

It is difficult to predict what NVIDIA will do because the results will vary depending on the company and market environment. NVIDIA is a great company that is putting all its efforts into it right now, but its P/E ratio is very high at around 70, so it will be interesting to see how the market reacts.

NVIDIA’s stock price was down about 1.3% on Friday, so its valuation may be slightly more attractive to new investors on Monday.