Nvidia Stock Split Might Not Lead To Sustained Rally, But It Could Replace Intel In Dow Index
What was the percentage increase in Nvidia's shares in May, and how much did it increase in the following month?
In May, Nvidia's shares surged by nearly 27%, and in the following month, they increased by another 10%.
How does Goldman Sachs view the long-term benefits of stock splits based on their review of 45 Russell 1000 stock splits since 2019?
Goldman Sachs' review of 45 Russell 1000 stock splits since 2019 led them to conclude that stock splits generally offer limited long-term benefits. They found a typical 4% rise in shares the week after the announcement but no apparent impact around the effective date. Additionally, stock splits have not significantly boosted retail trading activity, with liquidity showing little change post-split.
Why does Ben Laidler, a global markets strategist at eToro, believe that the Nvidia stock split could position the company for inclusion in the Dow, potentially replacing Intel?
Ben Laidler, a global markets strategist at eToro, believes that Nvidia's recent 10-for-1 stock split could position the company for inclusion in the Dow Jones Industrial Average (Dow), potentially replacing Intel23. This view stems from the fact that stock splits can make a company's shares more accessible to a broader range of investors, including retail investors, by reducing the price per share.
Nvidia's stock split might make its shares more attractive for inclusion in the Dow, which is a price-weighted index. In a price-weighted index, stocks with higher prices have a greater influence on the index's performance. As a result, the inclusion of Nvidia, with its lower price per share post-split, could potentially balance the index better than the higher-priced Intel.
Moreover, Nvidia has been performing exceptionally well, with its valuation surging 153% year-to-date, driven by an AI frenzy backed by U.S. Big Techs such as Microsoft, Meta Platforms, and Alphabet. Nvidia, along with these tech giants, accounts for about 60% of the S&P 500's 12% return this year. The company's strong performance and increasing importance in the tech industry could be another reason why Laidler believes Nvidia could replace Intel in the Dow.
However, it is essential to note that stock splits do not fundamentally change a company's value or its business prospects. The split itself does not guarantee inclusion in the Dow or sustained growth. Investors should carefully consider a company's financial health, growth prospects, and industry trends before making investment decisions.