Nvidia Just Announced a 10-for-1 Stock Split in June. This Artificial Intelligence (AI) Stock Could Be the Next Split.
What role do Nvidia's chips play in advanced AI systems according to The Wall Street Journal?
According to The Wall Street Journal, Nvidia's chips play a crucial role in advanced AI systems6. They are reported to underpin all of the most advanced AI systems, giving the company a market share estimated at more than 80%. This positions Nvidia strongly in the rapidly growing AI market, which is expected to experience a 36% annual growth through 2030, according to Grand View Research. Nvidia's strong competitive position is largely due to its graphics processing units (GPUs) which are widely used in cutting-edge graphics in multimedia and accelerated computing in data centers, particularly where artificial intelligence (AI) is concerned. The company's technology is used extensively in data centers and it has a significant presence in networking hardware and central processing units (CPUs).
What were the reported revenue and earnings growth for Nvidia in the first quarter?
In the first quarter, Nvidia reported a record revenue of $26.0 billion, up 18% from the previous quarter and up 262% from the same period last year. The GAAP earnings per diluted share for the quarter were $5.98, up 21% from the previous quarter and up 629% from the same quarter last year. Non-GAAP earnings per diluted share were $6.12, up 19% from the previous quarter and up 461% from the same period last year.
How does Nvidia's upcoming 10-for-1 stock split work, and when will it be effective?
Nvidia's upcoming 10-for-1 stock split means that for every single share of Nvidia stock an investor owns, they will receive nine additional shares. This will increase the total number of shares the investor owns by a factor of 10, while the price of each share will decrease by the same factor. The split-adjusted shares will begin trading at market open on June 10, 2024.
To illustrate this with an example, if an investor owns one share of Nvidia stock, which is currently trading for roughly $950 per share, after the stock split, they will hold 10 shares worth $95 each. The total value of their ownership won't change based on the split alone, it's merely a different way of viewing the whole.
The purpose of the split, as stated by Nvidia, is to "make stock ownership more accessible to employees and investors." This is often the case as the lower share price can increase demand for those shares among retail investors. However, it's important to note that the stock split will not impact the overall value of Nvidia nor will it impact an investment position. The split is simply a way to make the shares more affordable for a broader range of investors.