Nvidia's 10-for-1 Stock Split Boosts Shares 7%, BofA Predicts More in Tech

Key Takeaway

• Nvidia announced a 10-for-1 stock split effective June 7, boosting shares over 7% and making them more accessible to retail investors.
• Analysts view the split positively, with many raising price targets; historically, stocks gain 25% in the year following a split.
• Speculation grows that Nvidia could replace Intel in the Dow Jones Industrial Average due to its strong performance and broad investor interest.

Nvidia's Stock Split Announcement

Nvidia Corp. recently announced a 10-for-1 stock split, a move that has delighted investors and generated significant market buzz. The stock split, effective after the market close on June 7, will transform one share valued at around $1,000 into ten shares valued at approximately $100 each. This move aims to make Nvidia's shares more accessible to retail investors and employees, without altering the company's fundamentals. Nvidia's stock surged over 7% at the opening bell following the announcement, building on a 92% year-to-date rally and surpassing $1,000 for the first time.

Bank of America analysts, led by Jared Woodard, noted that "stocks with high share prices are typically prime candidates for split announcements," and that such moves can broaden access to the stock. Nvidia's split follows a stellar earnings report driven by robust AI momentum, which exceeded Wall Street expectations. Loop Capital's Ananda Baruah commented, "Given the degree to which retail investors pay attention to NVDA, we believe the split actually has an opportunity to make an impact."

Market Reactions and Analyst Views

The stock split has led many Wall Street firms to raise their price targets for Nvidia. Citi’s Atif Malik called the split a “positive surprise,” while Susquehanna’s Christopher Rolland said it “invigorates the retail crowd.” Needham’s Quinn Bolton added, “The 10:1 stock split likely adds short-term momentum to this AI bellwether.” Nvidia's shares have seen a significant boost, reflecting strong investor sentiment and confidence in the company's future growth, particularly in AI and gaming sectors.

Bank of America sees splits as "a sign of strength," noting that companies that split their stocks tend to see strong returns in the subsequent year. Historically, stocks have notched 25% total returns in the 12 months after a split is announced, compared to 12% for the broad index. However, the bank also cautioned that "outperformance is no guarantee," as companies can struggle in challenging environments.

Potential Dow Inclusion

Speculation is mounting that Nvidia could replace Intel in the Dow Jones Industrial Average. The decision rests with the S&P Dow Jones Indices Index Committee, which typically adds companies with excellent reputations, sustained growth, and broad investor interest. Nvidia meets these criteria, especially after its recent stock split, making it a strong contender. However, the committee also considers sector representation and stock price. UnitedHealth Group, the highest-priced stock in the Dow at $516, contrasts sharply with Intel, the lowest at $30. This wide price spread could influence the committee's decision, as they aim to maintain balance within the index.

Street Views

• Jared Woodard, Bank of America (Bullish on stock splits):

  "Stocks with high share prices are typically prime candidates for split announcements. Management teams might feel that lower stock prices broaden access to the stock."
  "Historically, stocks have notched 25% total returns in the 12 months after a split is announced, compared to 12% for the broad index."