Here’s What to Know About Nvidia’s 10-for-1 Stock Split

Nvidia (NASDAQ: NVDA) shares are rising again after the company reported quarterly results that exceeded Wall Street’s expectations and announced a 10-for-1 stock split.

• Nvidia reported a 427% year-over-year revenue increase, with notable growth in gaming and data center segments, leading to a 7% pre-market share price jump.
• CEO Jensen Huang provided strong Q2 guidance, expecting $28 billion in revenue, and announced a 10-for-1 stock split to make shares more accessible to retail investors.
• While stock splits typically don’t add real value, they can influence market sentiment. Historically, Nvidia’s past stock splits have been followed by significant stock price volatility within the next 12 months.
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Another Brilliant Quarter for Nvidia

In pre-market trading on May 23, following the earnings release, Nvidia shares jumped 7% thanks to an impressive 427% increase in revenue. The company also saw significant growth in other segments, with gaming revenue up 18% to $2.6 billion and data center revenue exceeding expectations at $22.6 billion. Automotive revenue reached $329 million, and professional visualization revenue rose 45% year-over-year to $427 million.

CEO Jensen Huang guided investors that Nvidia expects revenue of $28 billion for the second quarter, plus or minus 2%, surpassing analysts’ forecasts of $26.8 billion. He also projected an adjusted gross margin of around 75.5% and adjusted operating expenses of approximately $2.8 billion. Huang highlighted AI’s role in driving the next industrial revolution, with Nvidia set to transform traditional data centers into AI factories, boosting productivity and efficiency across industries.

The cherry on top for many investors was Nvidia’s announcement of a 10-for-1 stock split on June 7. The market well-received this move, especially since it makes the stock, which trades at nearly $950 per share, more accessible to retail investors.

Nvidia and The Stock Split

This is not the first time that Nvidia has announced a stock split. In fact, Nvidia has done it five times in the past.

But it’s worth noting that stock splits should matter very little, in theory.

The markets’ fascination with stock splits is often something of a joke. A good analogy to explain stock splits is that if you cut a pizza into more pieces, do you ultimately get more pizza? Would you pay more for pizza that is cut into ten slices rather than eight or four?

To begin with, I believe that the split concept is somewhat obsolete in today’s market environment. Many brokers in the U.S. offer the possibility for retail shareholders to own fractional shares. This means that an individual investor can own a small piece of Nvidia’s equity today for not much more than a few bucks instead of having to pay something like $950 for a single share.

Okay, but there are actually a few reasons why the split could still mean something to investors, even though it doesn’t change the company’s fundamentals.

Sentiment: at the end of the day, the value of a stock is what buyers are willing to pay, and that’s how Nvidia’s market value is defined. But if enough people believe that the split adds some value to the company, then it is worth some value to the company. But interestingly, based on the last five stock splits carried out by Nvidia, either by coincidence or by some influence of market sentiment, there have been severe pullbacks in the company’s stock price in the next 12 months, which doesn’t make stock splits a very encouraging coincidence.

• In 2000, there was a 45% drawdown.
• 2001, where there was a 28% drawdown in
• 2006, where there was a 5% drawdown and then a 20% rally
• 2007, there was a 7% rally and then a 50% drawdown
• and in 2021, there was a 9% rally followed by a 19% drawdown.

Index investing: another factor is that equity investors often choose not to be stock pickers and invest through index funds such as ETFs that follow the top indices. Some of these, like the Dow 30, are not market-cap weighted, so the Nvidia stock split matters in this case.

The Bottom Line

Nvidia’s stock split reflects the company’s strong momentum, having capitalized on the AI boom over the last few years. While the high share price often prompts companies to make this move to make their stock more accessible, it’s more of an optics move than creating any real value.

The psychological aspect does play a role in stock splits, but investors shouldn’t see this as a significant catalyst for Nvidia stock going forward.

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