US semiconductor manufacturer Nvidia’s stock price continues to rise with no end in sight. Its market capitalization has increased by more than $1 trillion (approximately 147 trillion yen) this year alone, and has swelled significantly since the last stock split. There is growing speculation that the artificial intelligence (AI) giant may once again have an opportunity to split its stock.
Nvidia last announced a stock split in May 2021, when the stock price was around $600. The stock, which was cut in half in a 4-for-1 split, has rebounded from a blistering 240% rally last year and is now nearing $1,000. While bulls argue that the stock’s valuation is relatively cheap given its future earnings growth, some investors may be wary.
Ken Mahoney, CEO of Mahoney Asset Management, said, “I think there will probably be a stock split in the next year or so.If that happens, small retail investors who think they can’t afford it right now.” It will also be easier for them to enter the market.”
Nvidia stock price
Source: Bloomberg
When Nvidia announced the stock split in 2021, it explained in a press release that the goal was to make stock ownership more accessible to investors and employees. The stock price then rose to about $750 by July 19, the day before fractional trading began. After that, after a period of weakness in 2022, it has now surpassed the pre-split level.
Stock splits are generally just a cosmetic measure to attract small investors. Although the equity per share decreases as the number of shares increases, the fundamentals and valuation of the stock remain the same.
“There are always two ways to think about it,” said Michael Sansoterra, chief investment officer at Sylvanto Capital Management. While he believes that stock splits have little meaning as they do not change corporate value in any way, he points out that “Retail investors’ psychology is that it is easier to buy a stock at $30 than at $300.” He explained, “It’s not actually cheaper, but it can be perceived as cheaper.”
To be sure, Nvidia hasn’t given any hints that it will split its stock anytime soon, and the stock is still rising, which doesn’t seem to have deterred all retail investors. In fact, according to data from Vanda Research, Nvidia is one of the most heavily traded stocks among retail investors, along with Tesla, Advanced Micro Devices (AMD), and Super Micro Computer.
Last year, when the market rose led by tech stocks, there were no stock splits by companies in the Nasdaq 100 index, a stark change from a few years ago during the coronavirus pandemic. .
Apple and Tesla both split their stocks in 2020. This was Tesla’s second split in two years. Alphabet and Amazon.com both split their stocks in 2022. On the other hand, Microsoft has not carried out a stock split since 2003. Microsoft’s stock price was about $50 in 2003, but it’s now more than $400.
If Nvidia can continue to deliver consistent growth on an upward trajectory, a stock split “makes sense,” said Mahoney of Mahoney Asset.
Original title:Nvidia Looks Primed for a Stock Split Post $1 Trillion Rally (1)(excerpt)
2024-03-08 17:30:00
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