Nvidia’s (NVDA.O), opens new tab 10-for-1 stock split aimed at enticing ordinary investors has been implemented, fueling discussion over the artificial intelligence bellwether’s inclusion in the blue-chip Dow (.DJI), opens new tab index.
The split, which aims to reduce per-share value to make it more accessible for employees and investors, raises the company’s outstanding shares while maintaining its market worth.
“A side-effect of Nvidia’s stock split will be to put it in the running to follow Amazon and Apple into the Dow, potentially pushing out fellow chip stock Intel (INTC.O), opens new tab that currently has the lowest weighting,” said Ben Laidler, global markets strategist at eToro.
The stock fell 0.2% on Monday, after rising about 27% since the business announced a share split and a good projection last month. The dominating AI chip maker also achieved $3 trillion in market value last week, surpassing Apple (AAPL.O), opens new tab, to become the world’s second-most valuable company, following only Microsoft (MSFT.O). “Historically, when we see runs like this into a split, there is often a hangover effect afterwards, and I’d expect some buyer exhaustion this week,” Dennis Dick, market structure analyst at Triple D Trading, said of Nvidia stock. According to market experts, stock splits attract individual investors who trade in smaller amounts and have less cash to deploy than institutional investors.
However, Goldman Sachs strategists led by David Kostin stated in a note that most previous stock splits have not resulted in a major rise in retail trading activity, with some notable outliers, such as Amazon’s (AMZN.O) opens new tab split in 2022 and Nvidia’s 2021 split.
Additionally, “investors typically assign higher valuations to liquid stocks because of their low trading costs and flexibility in a variety of market environments”, according to the strategists.
According to Goldman’s study of 45 Russell 1000 stock splits since 2019, trade volumes have momentarily spiked following stock split announcements but have remained rather stable throughout and after the splits took place.
Nvidia’s stock was last trading at $120 a share post-split, compared to $1,200 on Friday, making it a possible contender for the 30-member price-weighted Dow index (.DJI).
