Long-time Nvidia (NASDAQ: NVDA) investors would know know that this month hasn’t been the best for the chipmaker. NVDA stock went up to around $950 in March, but now, it’s trading at around $882, a downside of 7%.
With everything currently going on with Nvidia, many investors and analysts are wondering about the tech giant’s next move, and a lot of them think a stock split is imminent. Here’s why.
Why is NVDA Stock Down?
NVDA stock is down because it seems like some investors are choosing to take some profits after the huge run-up that send NVDA stock to $950. But despite the current decline, NVDA stock is still up over 80% for the year, and the stock has handily outperformed the broader market. Therefore, what’s been happening with the stock isn’t a demand issue, as the core of Nvidia’s business remains strong. In fact, lead times for its flagship H100 and H200 chips are still 30+ weeks, indicating robust demand.
This demand becomes clear when you compare Nvidia’s sales estimates for this year to those of a competitor. Back in January, Wall Street analysts revealed their expectations for the 2024 sales of one of Nvidia’s main competitors, AMD (NASDAQ: AMD), which were between 250,000 and 500,000 units of its MI300 AI data center chip. Meanwhile, Nvidia is expected to ship around 4 million GPUs this year. This is a significant difference and shows how far ahead the company is from the competition.
Therefore, while the stock may continue facing headwinds in the near term, the long term thesis remains bullish because Nvidia is at the forefront of multiple industries, including AI, gaming, and self-driving cars.
Will Nvidia Stock Split?
Nvidia has been a mover and shaker in recent years. The company became the world’s number one chip manufacturer, and now holds around 80% of the market. This translated into soaring revenues, and really good profitability. The company continues to innovate, recently announcing the upcoming launch of a new chip architecture, the Blackwell platform, and its most powerful chips ever.
Nvidia is always on the move, so it’s natural that investors love to try predicting its next big move, and one prediction that many people are making is about a potential stock split. This could make sense, since the company’s stock has soared past a level that, in the past, coincided with a split decision.
| Date | Split Ratio | Approximate Price before the Split | Approximate Price after the Split |
| 6/27/2000 | 2-for-1 | $148 | $63 |
| 9/17/2001 | 2-for-1 | $75 | $27 |
| 4/7/2006 | 2-for-1 | $57 | $29 |
| 8/27/2007 | 1.5-for-1 | $51 | $32 |
| 7/20/2021 | 4-for-1 | $726 | $195 |
NVDA stock has been up by more than 220% over the past year, bringing the company’s market cap to $2.2 trillion, and today trades close to $900. Back in May of 2021, NVDA stock was trading at nearly $700, and the company announced a 4-for-1 stock split and aimed to win approval during its June annual meeting.
Many are predicting that this scenario could happen again, and Nvidia could announce the split during the company’s next earnings report in May, or during its next shareholder meeting, which will likely take place in June.
Reasons for an Nvidia Stock Split
Nvidia’s last stock split happened when the company’s stock price reached similar levels to where it is now. Therefore, many expect Nvidia to announce a split after it announces great earnings, and as the stock approaches $1,000. Another reason is that a stock price near $1,000 or beyond makes it difficult for some new investors to get in on the investment opportunity. While fractional shares exist, some brokerages don’t offer them, and investors might prefer buying full shares.
Investors may also worry that even if the stock’s valuation is fair, it’ll still struggle to grow significantly once it reaches thousands of dollars, which could make them hesitate before buying a $900 stock. Keep in mind that Nvidia has completed five stock splits in the past; the earlier splits happened between 2000 and 2007. This means that Nvidia is no stranger to stock splits and could easily agree to one. With a split being highly likely, the important question now is, if a split were to happen, how would it impact NVDA stock.
Impact on NVDA Stock
If Nvidia does a stock split, the stock could become more accessible to new investors, which could lead to more people buying the stock and this would be Nvidia stock’s newest positive catalyst. On the other hand, NVDA stock didn’t immediately move after Nvidia did the 2021 split, and gained later in the year thanks to the company’s revenue growth, so it can go both ways.
The certain thing is, more investors would be more willing to buy the stock after a split, rather than investing in some of Nvidia’s lower-priced competitors in the chip industry, which is something a lot of people do simply because they feel like they’ve missed out on Nvidia. If you don’t own Nvidia shares, you might find it a great buying opportunity if a split happens. Still, it doesn’t matter whether you buy the stock today or after a potential split because, in both cases, you could win by getting in on Nvidia’s long-term AI story.
What’s Next for Nvidia?
Nvidia has been an incredible company for many years now, and its innovation and ability to find ways to implement AI technologies in various industries has positioned it to be a leading company in the AI boom. Right now, many companies are increasing their investments in generative AI technologies. Last year, McKinsey estimated that generative AI could contribute an impressive $2.6 trillion to $4.4 trillion to the global economy annually across various use cases.
This is higher than some countries’ GDPs, and of course, Nvidia is extremely well-positioned to capitalize on the opportunities generative AI presents. We all know how OpenAI kicked off the generative AI craze when it released ChatGPT two years ago, and Nvidia benefitted from this because ChatGPT was trained using Nvidia GPUs, so it’s highly likely that companies that are developing generative AI technologies will go to Nvidia for its AI chips.
Nvidia’s next-generation chips, which offer high computing power, are poised to become the preferred choice for these companies. The company also touts its Blackwell chips as the most powerful chips for AI because they reduce energy consumption by 25 times over the company’s flagship H100 chip and deliver computations 30 times faster.
The world is changing, and the need to automate workflows across industries is fueling the demand for generative AI. With the surge in AI investments across the data center end market, Nvidia expects its Q1 fiscal 2025 revenues to reach $24 billion, a significant increase from $7.19 billion in the year-ago quarter. Thanks to this, the recent stock price decline could present a buying opportunity for long-term investors.
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